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On June 20, the Texas Supreme Court ruled that courts are not authorized to order closely held corporations to buy out a minority shareholder’s interests under state law, and that no common-law cause of action exists for minority shareholder oppression claims. Ann Caldwell Rupe, a minority shareholder in Rupe Investment Corporation (RIC), a closely held corporation, alleged that other shareholders on the board of directors acted oppressively and breached their fiduciary duties by refusing to buy back her shares for fair value or discuss the company with prospective outside buyers. The trial court granted Rupe $7.3 million for her shares, and the Court of Appeals for the Fifth District of Texas at Dallas upheld the buy-out order. The Texas Supreme Court reversed, holding that the shareholders’ refusal to meet with Rupe’s potential buyers was not “oppressive,” and that even if the actions were indeed oppressive, the statute does not authorize courts to order a corporation to buy out a minority shareholder’s interests. The court also declined to recognize a common-law cause of action for “minority shareholder oppression.” The court remanded to the court of appeals because its judgment was based on the oppression claim and did not address Rupe’s claim for breach of fiduciary duty.
Ritchie v. Rupe, No. 11-0447 (Tex. Sup. Ct. June 20, 2014).
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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