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What to consider before forcing a buyout

On Behalf of | Sep 22, 2021 | Uncategorized |

If you are the majority shareholder of your Minnesota company, you have a lot of say over how the organization is run. For instance, you generally get the final say over what products the firm sells, who it hires for key positions, and how it will raise money. However, your status as a majority stakeholder doesn’t always give you the right to force minority shareholders out of the company.

A supermajority may be needed to force the sale

In many cases, a supermajority of shareholders will need to give their consent for a buyout to occur. This means that you may need to form a coalition of owners who agree that a buyout should proceed before you can actually go through with it. However, even if there is a broad consensus as to how the company should proceed, minority shareholders can take action to prevent a forced sale from taking place.

What can minority shareholders do to block a forced sale?

A minority shareholder who believes that the majority shareholders are acting in bad faith may take action to stop the sale. This is referred to as fraud in the minority, and a business law professional may be able to help a shareholder hold the majority accountable for its actions. Alternatively, a minority owner can engage in settlement talks to obtain a deal that is more to his or her liking.

Ideally, you will balance your interests with those of minority stakeholders when attempting to take action that might radically impact your firm’s future. This is because it may be possible for a minority owner to stop or delay a sale if it isn’t in their best interest to allow it to proceed.