Shareholders have certain obligations to the businesses that they invest in and derive certain benefits from as well. They have the privilege of learning information about company operations at shareholder meetings and potentially voting on key matters related to the company. When the business is profitable, they also receive dividends.
In some cases, a prior sole owner who wishes to regain control or a coalition of minority shareholders might seek to squeeze out or freeze out other shareholders. The goal is to force them to sell their interests in the company.
What are some of the warning signs of a freeze-out in process?
1. Missed notification of shareholder meetings
Shareholders should receive advance notice of meetings so that they can ensure that they can attend. In cases where shareholders do not receive notice about meetings in advance or where they receive inaccurate information, that could indicate an attempt to deprive them of their rights.
2. Omission from critical votes
In some cases, there may be attempts to subvert the rules governing shareholder voting rights. Private meetings only attended by certain shareholders could lead to some shareholders losing their opportunity to vote on critical matters. Intentional omission from the voting process during meetings could also serve as a warning sign of attempts to push out certain shareholders.
3. Failure to provide dividends
In some cases, shareholders may not receive the dividend checks that they deserve despite the company generating profits. The goal may be to create frustration or to undermine the perception of the investment as a valuable one.
Shareholders should have the option of selling their shares, but they should not have to face manipulative attempts to force them into selling their holdings in the company. Those facing a potential freeze-out or similar shareholder controversies may need assistance asserting their rights, and that’s okay.
