“Minority shareholder oppression” is a legal claim that occurs when the majority shareholders in a closely held corporation engage in “oppressive” action that unfairly prejudices the minority shareholder’s interests. In 2014, the Texas Supreme Court took on this issue in the case of Ritchie v. Rupe, issuing a decision that eliminated the cause of action for minority shareholder oppression in Texas.
Ritchie v. Rupe centered on minority shareholder Ann Rupe and her attempt to sell her minority stake to an outside party. Rupe requested a meeting with majority shareholder Ritchie and potential outside buyers of her shares, but this meeting was refused. She then sued on the grounds that this prevented her from selling her shares - i.e. "oppressing" her "interests." The case made it all the way to the Texas Supreme Court, which ultimately ruled against Rupe, stating that Texas law does not recognize a claim for “minority shareholder oppression.”
Since the Texas Supreme Court’s decision, many have wondered whether the Texas Legislature would step in. In the last legislative session in 2015, Representative Ron Simmons introduced HB 3168 which sought to expressly give Texas courts the power to award expansive remedies in situations when a board of directors was found to have oppressed a minority shareholder. The bill never made it out of the House Business and Industry Committee. In 2016, the Committee held hearings on the bill and released its findings and recommendations in December 2016 (here).
Although the Committee stated that it recognizes the need for adequate protection of minority shareholders, it concluded that there was insufficient information available to make a formal recommendation on a statutory solution to Ritchie v. Rupe.
Bottom line: It does not appear that the Legislature in this session will change the current legal landscape regarding minority shareholder oppression. The ruling in Ritchie v. Rupe stands, at least for now.
