This paper will analyze the use of the oppression action by minority shareholders in close corporations
, minority shareholders in public corporations, debtholders, lenders, trade creditors, contract counterparties, involuntary creditors, employees, and the corporation itself.
For example, in considering whether to disregard the direct-derivative distinction for a shareholder suit in the close corporation
, the absence of harm to creditors is an important consideration in allowing a minority holder to maintain as a direct action a suit that customarily must be brought on behalf of the corporation as a derivative suit.
the overall investment of a shareholder in a close corporation
W]e hold that stockholders in the close corporation
owe one another substantially the same fiduciary duty in the operation of the enterprise that partners owe to one another.
A corporation does not have to be incorporated as a statutory close corporation
for shareholders to owe fiduciary duties.
In the case of a close corporation
, there is a lack of an organized market for the trade of the shares (37).
In order to receive favorable taxation, the statutory close corporation
can decide whether to be taxed under subchapter C or subchapter S of the IRS code.
Moll, Shareholder Oppression and "Fair Value": Of Discounts, Dates, and Dastardly Deeds in the Close Corporation
, 54 DUKE L.
2005) (noting early close corporation
litigation grew from inflexibility of corporate statutes aimed at large corporations); Note, Statutory Assistance for Closely Held Corporations, 71 HARV.
20) In the court's opinion, the relationship among the stockholders in a close corporation
is just like that of partners in a partnership; meaning that if the enterprise is to succeed, then the relationship must be one of "trust, confidence and absolute loyalty.
952 Court proceeding by shareholder in close corporation
According to the IRS, "the cumulative effect of the retained powers and the rights flowing from the shares not placed in trust leaves the grantor in control of a close corporation
and assures control for his lifetime.