• Home
  • About
    • Thomas R. Brule
  • Services
    • Franchise & Business Developement
    • Litigation
    • Arbitration
  • Results
  • Contact
  • Blog
Brule Law Firm, LLC
Phone:  (216) 789-4229
     Fax:  (216) 916-4744
​        BruleT@gmail.com
​                BruleLaw.com

Fiduciary Duty in the Close Corporation under Ohio Law

4/25/2016

12 Comments

 
The “close corporation” form provides several benefits that may be attractive to the small or medium business.  Though it closely resembles a partnership, the close corporation is a separate business entity and therefore provides its owners with another layer to limit personal liability.  Additional benefits include free transferability of ownership, perpetuity of the corporate entity, and a structure for management, among others. 

​However, the close corporation may also include certain drawbacks, particularly as it concerns minority shareholders.  Without a controlling vote, the minority shareholder may be subject to oppression by the controlling majority, including through refusal to issue distributions, the granting of excessive salaries and other benefits to majority owners, and lockout from the operation of the business.  And although shares in a close corporation are normally freely transferrable, it may be difficult to find a market for a minority interest, and the minority shareholder may be unable to obtain the value of his or her interest in an arm’s length transaction.  For that reason, the close corporation form depends on a relationship of trust, confidence and loyalty among the shareholders.  That relationship is protected under Ohio law by the courts’ recognition of a heightened fiduciary duty between majority and minority shareholders in close corporations.

Under Ohio law, a “close corporation” may be self-identified, through a close corporation agreement, or may be identified by the courts as any corporation for which shares are not publicly traded on an open securities market and which has relatively few shareholders.  The Ohio Supreme Court has held that shareholders in a close corporation owe each other a heightened fiduciary duty and that a majority shareholder may not act in his own benefit while denying equal opportunities to the minority.  Based upon the heightened fiduciary duty, the courts of appeal have further held that a shareholder in a close corporation is not an employee at will and cannot be terminated without a legitimate business purpose.  Absent a legitimate business purpose, a minority shareholder cannot be denied an equal opportunity to participate and receive a fair return from the business.  Further, some Ohio courts have held that the burden is on the majority shareholder to establish that he or she acted fairly in dealing with the minority owner.
​
While the close corporation provides many benefits for its owners, the form is subject to abuse by the controlling shareholder.  For that reason, Ohio law and the Ohio courts recognize special protection for minority shareholders, including a right to participate and benefit from the business, a right to information, and a framework of procedures for the management of the business and the distribution of profits.  These special protections are embodied in a “heightened fiduciary duty,” the highest level of care recognized by the law, between the shareholders of a close corporation.

Brule Law Firm has extensive experience protecting the rights of minority owners and resolving business disputes between shareholders.  Contact Brule Law Firm to find out how we can help.
12 Comments
Allentown divorce lawyer link
3/19/2017 07:08:54 am

Divorce is an extremely painful and long-drawn process for anyone unfortunate enough to go through it. The support of friends and family is vital at this point to keep the divorcees' emotional health intact, and the services of a well-qualified, experienced attorney are necessary to keep the legal side of things as straightforward as possible.

Reply
Chimney Cleaning San Antonio link
7/31/2017 11:50:27 pm

When dealing with legal matter, depending on the type of case you are involved in, there are a number of lawyers you can hire to work with you on your claim. Choosing the right law firm is not only going to result in you getting the best results in your legal battle, but it is also going to ensure that you are dealing with the most qualified and competent lawyers in the area of law your case falls in, when you are trying to find the best possible representation for that case.

Reply
uncontested divorce link
11/14/2017 11:03:02 pm


it was a wonderful chance to visit this kind of site and I am happy to know. thank you so much for giving us a chance to have this opportunity..

Reply
personal injury link
2/1/2018 01:04:03 am


Thanks so much for sharing this awesome info! I am looking forward to see more postsby you!

Reply
https://www.eliaandponto.com link
10/21/2018 06:12:51 am

Great! It sounds good. Thanks for sharing..

Reply
Orange County Divorce Attorneys link
6/28/2022 01:20:36 pm

For that reason Ohio law and the Ohio courts recognize special protection for minority shareholders, including a right to participate and benefit from the business, a right to information, Thank you for making this such an awesome post!

Reply
Orange County Family Law Attorneys link
6/28/2022 01:50:02 pm

The Ohio Supreme Court has held that shareholders in a close corporation owe each other a heightened fiduciary duty I’m so thankful for your helpful post!

Reply
바카라사이트 link
8/22/2022 03:56:10 am

Positive site, where did u come up with the information on this posting?I have read a few of the articles on your website now, and I really like your style. Thanks a million and please keep up the effective work.

Reply
바카라사이트 link
9/1/2022 12:45:13 am

Someone Sometimes with visits your blog regularly and recommended it in my experience to read as well. The way of writing is excellent and also the content is top-notch. Thanks for that insight you provide the readers!

Reply
카지노사이트 link
9/1/2022 12:45:34 am

This particular papers fabulous, and My spouse and i enjoy each of the perform that you have placed into this. I’m sure that you will be making a really useful place. I has been additionally pleased. Good perform!

Reply
Tipos De Letras link
9/8/2022 04:54:09 am

Positive site, where did u come up with the information on this posting?I have read a few of the articles on your website now, and I really like your style. Thanks a million and please keep up the effective work.

Reply
Generador De Whatsapp link
9/8/2022 05:49:56 am

This was really an interesting topic and I kinda agree with what you have mentioned here!

Reply



Leave a Reply.

    Author

    Thomas R. Brule, founder of Brule Law Firm, LLC, has extensive experience in franchise and business law.

    Contact Brule Law Firm
    ​

    Archives

    May 2016
    April 2016

    Categories

    All

    RSS Feed

    Photo by Polybert49
Proudly powered by Weebly