Whenever shareholders or partners come into dispute or enter into litigation, it can seem that one side or the other has all the power. In reality, the situation is often more balanced than it appears and acting like the other party is in control can become something of a self-fulfilling prophecy.
In most cases, the majority party among shareholders or partners seems to be in control. The majority would inform the minority their employment has been terminated or would hold back cash distribution or use another tactic to try to squeeze minority. The majority likely has greater financial resources to weather suspension of salaries of distributions or the elimination of perks and benefits. The minority may feel their only recourse is a lengthy and costly legal battle.
One of the ways for the minority to contest squeeze play by the majority is to seek a Receiver or Custodian, an option provided under the Illinois Business Corporation Act. A Custodian is a court appointed person who manages the business and its affairs. Such an appointment is often seen as a death knell for a company. A Custodian is an outsider and operates with different motives than the shareholders and they may not have the hands-on experience to manage the corporation long term.
Just the credible threat that a Custodian or Receiver could be appointed may be enough to demonstrate to the majority they do not hold all the power and that might lead to a more favorable resolution. Of course, following through with the threat and actually having a Custodian appointed may cause the corporation harm. As with most everything in corporate disputes, each situation will be unique.
Horowitz Law Offices represents shareholders, stockholders, corporations, partners, partnerships, and Limited Liability Companies for disputes between stockholders and partners including squeeze outs and freeze outs. You are welcome to contact us at 312 787 5533 or firstname.lastname@example.org