Shareholder oppression is when shareholders that are in control of a company engage in conduct that is unfair to shareholders who are not in control. The same applies to members of a limited liability company (LLC) or partners in a partnership. One of the most common oppression tactics is to withhold information from the oppressed shareholders. That way, the controlling shareholders can misuse company funds or make business decisions without concern of oversight.
In most states though, including Minnesota and North Dakota, corporate shareholders, LLC members and even partners in partnerships have an absolute right, upon written demand, to company records and financial information. Statutes governing this right are found in the business corporation acts for Minnesota and North Dakota at: Minn. Stat.§§302A.461 and 302A.463; and N.D.C.C. §10-19.1-84. Similar rights are established by statutes governing LLCs and partnerships at: Minn. Stat. §§322B.373, 322B.376, 323A.0403; N.D.C.C. §§10-32.1-42 and 45-10.2-34.
Often when we consult with oppressed business owners, we need to request this information from their company to better understand the circumstances and their rights.
Beyond the right to secure the information listed in these listed laws, in both states, shareholders also have a right to inspect and copy other documents and information as well, with the only caveat that the requesting party have a “proper purpose.” The concept of proper purpose has been construed broadly, and includes the need to evaluate the value of the business or the conduct of the company's officers.
In life, knowledge is a powerful tool. It is no different for shareholders. Securing information about your company is the first step in ascertaining the value of the business, exposing wrongful conduct or simply better understanding what you own.