Minority Shareholders

Tuesday, May 23, 2017

Shareholder Derivative Claims: The Sharp Arrow in the Quiver Still Available to Minority Shareholders In Texas Private Companies

By: Ladd Hirsch

Based on our personal experience handling Business Divorce matters for both majority owners and substantial minority investors in private companies, we have learned firsthand that there are two sides to every story and every Business Divorce matter is unique.


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Tuesday, April 11, 2017

Despite Dante’s Warning (Abandon Hope), There is Hope for Minority Investors Who Failed to Obtain a Buy-Sell Agreement Before Acquiring Their Interest

By: Ladd Hirsch

Life is all a about second chances.   In the business world, minority investors may feel that they are trapped if they failed to obtain a buy-sell agreement before investing and have no contractual right to exit the company.  This situation is common in family businesses when the minority owners did not request their grandparents, parents or other family members to provide a buy-out right at the time the company was formed.  Fortunately, all hope is not lost for minority investors who did not obtain a buy-sell agreement before they obtained their stake in the company.  This post explores ways minority investors may secure a buy-sell agreement with majority owners even after the investors acquired their minority ownership interest in the business.


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Tuesday, December 20, 2016

Brave New World: Minority Shareholders Take the Shackles Off - Looking Back at Private Company Ownership Issues During 2016 (Part 2)

By: Ladd Hirsch

Tis the season to say, out with the old and in with the new.  But for minority shareholders with ownership in private Texas companies during 2016, not much changed.  Minority shareholders remained without access to a buyout remedy under Texas law, which resulted in minority owners pursuing traditional claims against majority owners, as well as seeking relief under more novel causes of action. 

This is the second in a two part series on significant legal issues that affected private company business owners during 2016.  We consider in this post how the absence of a claim for minority shareholders that would permit them to secure a buyout remedy has resulted in a spike in claims filed against majority owners for breaching the fiduciary duties they owe to their companies, and also caused minority owners to consider other legal remedies to pursue against majority owners.


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Monday, December 12, 2016

A Look Back at 2016 – Legal Issues Affecting Texas Private Company Owners and Investors (Part 1)

A sure sign the year is winding up is the release of A sure sign the year is winding up is the release of TIME magazine’s “Person of the Year” list.  If TIME created a similar list of legal developments impacting owners and investors in private Texas companies this past year, at least two issues would be on it: the adoption of the Defend Trade Secrets Act and the stalemate that continues to exist for minority shareholders who have claims for oppression against majority owners.  The legal restrictions on the oppression claim have spurred an increase in shareholder derivative lawsuits containing allegations that private company officers and directors breached their fiduciary duties to the business.


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Wednesday, September 21, 2016

The Eye of the Beholder: Valuing a Private Company Ownership Interest

By: Charles Rubio and Ladd Hirsch

Unlike public company stock, which actively trades electronically on national exchanges at published prices, ownership interests in private companies, and minority interests in particular, are often not readily marketable.  As a result, determining the value of an ownership stake in a private business can be a thorny problem.  Business owners and investors who want to determine the value of their ownership interest typically need to retain an independent business valuation expert to conduct a valuation of the company from which they can then calculate the value of the ownership interest at issue. 


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Monday, June 13, 2016

Swimming with the Sharks (Part 1): Attracting Private Equity Investment in Your Business


By:  Ladd Hirsch (Dallas)

For years, use of the term shark in a business context referred to unsavory characters such as shady lenders, sketchy lawyers and unscrupulous business people.  More recently, the success of the hit reality TV show “Shark Tank,” has given sharks a Hollywood make-over, and a more positive image.  The Shark Tank show features small business owners as contestants who present their needs for capital to a panel of rich investors (the sharks), including Dallas Mavericks owner Mark Cuban.


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Wednesday, April 27, 2016

Disastrous Business Partners Part 2: Confronting the Highly Dysfunctional Majority Owner


By: Ladd Hirsch (Dallas)

In the National Football League, quarterbacks may receive too much credit when their team wins and too much blame when they lose. It is easier celebrate or criticize the person we consider the face of the franchise.   Perhaps this tendency comes from our experience in business world where the success or failure of a private company often traces to the leadership of its majority owners.

Because the success of a private company is so closely linked to the actions of  the majority owners, minority investors need to be closely attuned to signs of trouble. Just as importantly, minority investors should also have a plan in place if it becomes clear that the majority owners of the business are either irretrievably corrupt or hopelessly inept.


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Tuesday, April 12, 2016

Disastrous Partners: The Problem of Highly Dysfunctional Business Partners Part 1: Majority Owner Strategies In Dealing With Difficult Minority Investors

By: Ladd Hirsch (Dallas)

It feels like a sharp punch to the stomach – a physical reaction to the sudden realization that a longtime business partner’s actions have put the business at risk. This is not a disagreement over differing approaches to business issues. It is a full-blown crisis threatening the company’s continued existence. In these situations, the best option is to secure a prompt business divorce that removes the dysfunctional partner from the company.  But, is that possible, and it not, do other options exist to address the disastrous partner situation?

This Post is the first in a two-part series that considers how to respond effectively to, and ultimately secure a business divorce from, a highly dysfunctional business partner.


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Monday, January 11, 2016

The New Normal: Shareholder Derivative Lawsuits in Texas - Key Issues in Filing and Prosecuting Derivative Claims

By:  John Tancabel (Dallas)

As 2016 begins, the anecdotal evidence indicates that derivative lawsuits filed by private company shareholders in Texas are increasing.  This rising tide of shareholder derivative litigation was easy to foresee after the Texas Supreme Court’s Ritchie v. Rupe decision in June 2014 rejecting court-ordered buyouts for shareholder oppression and leaving only receivership as a remedy for oppressive conduct by majority owners.  Minority owners, however, are still permitted to pursue shareholder derivative lawsuits filed in the name of the company to recover for injuries sustained by the business.


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Wednesday, November 11, 2015

Positive Private Company Culture (Part 3): The Real Deal Matters in the Real World

By:  Ladd Hirsch (Dallas)

Sincerity is everything. If you can fake that, you’ve got it made.” George Burns

We smile as we read George Burns’ famous quote because authenticity is such a key to success, we know some companies will attempt to fake it.   In the business world where clients crave authenticity, however, false attempts at sincerity are a major turnoff.

How do we know that a company gets sincerity?  The small things often provide the best clues.  My brother-in-law, Jeff Frankel, owns a Mexican restaurant, Mattito’s, and it was obvious he was doing the right thing the first time I visited when the waiters quickly refilled the chips and salsa without being asked. At Mattito’s, diners are greeted with a friendly warmth that cannot be faked. The food is always great, and is served promptly. Jeff treats his employees like family, many of whom have worked at Mattito’s for years. They enthusiastically respond to his genuine appreciation.  These “small things” spell success for Jeff, and his restaurants receive glowing reviews.  It is therefore no surprise that Jeff will soon be opening his fifth Mattito’s location in the Dallas/Fort Worth area (across from Vista Ridge Mall).


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Wednesday, November 4, 2015

Building A Positive Company Culture 101: A Critical Asset Not on the Balance Sheet (Part 2)

By Ladd Hirsch (Dallas)

I came to appreciate the importance of a positive business culture when I first started practicing law as an associate attorney more than 30 years ago – well before the advent of smart phones, tablet computers and even the internet.

An organization’s culture is not set by decree; it is established through the (often subtle) actions of its leaders.  At my firm, the name partner and co-founder built our culture through the way that he treated people.  He insisted that everyone at the firm call him by his first name and he would stop you in the hall (always with a smile) if you called him by his last name.  Despite his busy schedule, he made the time throughout the year to call everyone – from senior partners to receptionists and mail room clerks – to wish them a happy birthday on their special day.  He lived out our culture by being approachable and showing that success would be based on merit, not rank. His remarkable openness, warmth and personal attention set the tone for the firm, which resonated both internally and externally.


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With offices in Houston and Dallas Texas Business Divorce a division of Diamond McCarthy LLP assists clients throughout Texas including Austin, San Antonio, Midland, Fort Worth, Galveston, Amarillo, Abilene, and Waco.



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