Shareholder Oppression in Texas Close Corporations: Majority Rule (Still) Isn't What It Used To Be

Abstract

The doctrine of shareholder oppression protects the close corporation minority stockholder from the improper exercise of majority control. Although the Texas Supreme Court has not explicitly recognized the doctrine, appellate courts in Texas and in other jurisdictions have recognized and applied it in numerous decisions. Moreover, there is a statutory basis for the doctrine in Texas, as shareholders are given the right to petition for receivership, liquidation, or less harsh remedy on the grounds of oppressive conduct by directors or those in control. Because the shareholder oppression doctrine potentially alters a number of fundamental legal principles, it is critically important to be familiar with the doctrine's operation in close corporation disputes.

Keywords: oppression, close corporation, closely held, shareholder oppression, Texas