After Classic Corp. went public at $12 a share, it began suffering many years of losses. Isaac Fogel, who owned 64 percent of the stock, decided to take the company private again by buying shareholders' stock at a price of 20 cents a share. Classic hired two financial advisers who opined that the buyout price was fair. The board of directors voted in favor of the sale and then scheduled a special shareholder meeting to vote on the buyout. Do the minority shareholders have any rights?

a. No, they only have the right to inspect the corporate books. b. No, minority shareholders have no recourse against the decisions of majority shareholders. c. Yes, they have the right to include an alternative proposal to be voted on at the meeting. d. Yes, they have legal protection and are owed a fiduciary duty from the majority shareholders

Question

Paulina Richards

Business

4 February, 17:40

After Classic Corp. went public at $12 a share, it began suffering many years of losses. Isaac Fogel, who owned 64 percent of the stock, decided to take the company private again by buying shareholders' stock at a price of 20 cents a share. Classic hired two financial advisers who opined that the buyout price was fair. The board of directors voted in favor of the sale and then scheduled a special shareholder meeting to vote on the buyout. Do the minority shareholders have any rights?

a. No, they only have the right to inspect the corporate books. b. No, minority shareholders have no recourse against the decisions of majority shareholders. c. Yes, they have the right to include an alternative proposal to be voted on at the meeting. d. Yes, they have legal protection and are owed a fiduciary duty from the majority shareholders

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Answers (1)

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Rene Booth · Answer 1

D) Yes, they have legal protection and are owed a fiduciary duty from the majority shareholders

Explanation:

Minority shareholders cannot automatically be forced to sell their stock by majority shareholders, neither majority shareholders can be forced to purchase minority shareholders' stocks.

Usually the shareholder's agreement includes clauses that can affect how the corporation will be managed and how will disputes between shareholders be handled, e. g. shotgun clauses (that allows the right to sell or buy shares from another shareholder), preemptive rights, right of first refusal, piggyback rights, non-compete clauses, etc.