| (January 1, 2002. Manchester, NH.) - SPhB+G recently represented a minority shareholder in a closely held software company in an action against the majority shareholder. The parties were 49 and 51 percent shareholders in a software company that they incorporated in the mid 1990's. As part of their formation agreement, they had agreed to vote for and maintain in office the other stockholder as a director of the corporation.The parties had also informally agreed to be compensated equally.
In 2001, the minority shareholder discovered that the majority shareholder had secretly been compensating himself at a far greater rate, and had been making exorbitant payments to his wife for bookkeeping services and to his parents. Shortly after he was confronted with this, the majority shareholder took action to vote the minority shareholder from the board of directors and terminate his employment with the company, claiming that the minority shareholder's job performance had been inadequate.
SPhB+G filed a petition on behalf of the minority shareholder individually and derivatively on behalf of the corporation seeking to enjoin the majority shareholder from attempting to squeeze him out of the company by removing him as a director, officer and employee of the company. Claims of breach of contract, breach of fiduciary duties and corporate waste were also advanced.
A two-day evidentiary hearing on the claim for injunctive relief was held at the Hillsborough County Superior Court. Following that hearing, the Court granted the minority shareholder's request for injunctive relief, ensuring continued directorship of the corporation, continued employment and equal compensation for the minority shareholder.
SPhB+G subsequently counseled the minority shareholder in a mediation that resulted in a settlement of the entire litigation. The terms of this settlement were favorable to the minority shareholder and included a 50% ownership in the corporation, continued directorship and employment, equal compensation for at least 18 months, reimbursement of a major portion of the majority shareholder's excess and extraneous salary payments, and payment of attorneys' fees by the corporation.
For more information about this case or stockholders rights and remedies in general, please contact Michael C. Harvell at 603.627.8133 or Michael J. Lambert at 603.627.8137.
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