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I'm a shareholder, owning less than 50% in a small private incorporated Canadian business. A year ago, the majority shareholder (the owner/operator/President) unilaterally accepted a full-time permanent job in another (non-competing) company after six years of operating the small business that I invested in full-time. As a result of him accepting the full-time permanent job elsewhere, the small business is now open only two days per week, as opposed to the previous five or six days per week.
As far as I can tell, this is a Breach Of Fiduciary Duty, in terms of loyalty and care:
Duty of Loyalty – he is not prioritizing the company and the shareholder’s best interests. The owner made this decision to accept a full-time permanent job elsewhere, and reduce the operating hours to only two days per week, unilaterally without consulting the shareholders.
Duty of Care – he is neglecting his responsibilities and not acting diligently in managing the company. He claims the business is in financial decline ($25,000 in debt) and the reduced hours will result in lost revenue and customer dissatisfaction. The business has become little more than a side project for him and duties to maximize the business efforts are now being violated.
As a minority shareholder, the owner’s actions further suggest shareholder oppression, because accepting a full-time permanent job and reducing the business’s operating hours prioritizes his own personal interests over those of the company.
Is a derivative lawsuit to recover damages, such as demanding a shareholder buyout at fair market value the appropriate direction to take based on his breach of fiduciary duty and shareholder oppression?
05 months ago
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