On Jan. 15, 2026, the U.S. Court of Appeals for the Sixth Circuit issued a published opinion in Boyd v. Northern Biomedical Research, Inc., clarifying the fiduciary duties directors owe to minority shareholders in a closely held Michigan corporation.
The court reaffirmed, under Michigan common law, directors of a closely held corporation owe a heightened partnership-like fiduciary duty to shareholders. Specifically, directors must generally disclose to shareholders all material facts that may influence shareholder action. The court distinguished related Delaware law and characterized this as a duty of “full and frank disclosure.” Importantly, this duty is higher than that imposed by federal, Delaware and Michigan securities laws.
The Boyd Case
In Boyd, the plaintiff minority shareholder sold his shares in a closely held Michigan corporation without being informed of the company’s preliminary discussions concerning a potential private equity investment. That private equity financing implied an enterprise value of roughly quadruple the valuation used in plaintiff’s redemption less than seven months earlier.
The minority shareholder, represented by Warner, sued the directors alleging that their failure to inform the shareholder about their discussions with the private equity firm breached the defendants’ fiduciary duties under Michigan common law, potentially robbing plaintiff of the increased value of his shares. The trial court granted summary judgment to the defendants, but the Sixth Circuit reversed.
The Sixth Circuit held that Michigan law imposes a relatively demanding disclosure obligation on directors of a closely held corporation. Under Michigan law, directors must “exercise candor” toward shareholders and “disclose all material facts within their knowledge that may influence shareholder action.” Directors of closely held corporations are held to a heightened standard, one “more akin to partnership law.” In Boyd, that meant the minority shareholder plaintiff may have been entitled to know about the company’s consideration of equity financing and the fact that another firm was interested in the company.
The court decided the company may have had a duty to disclose, even though the corporation’s relationship with the private equity firm had not resulted in an exchange of firm numbers at the time the plaintiff sold his shares. It concluded the private equity firm’s interest was the sort of information which “might have influenced his calculus as a minority shareholder.”
Practical Implications for Boards, Officers and Investors
This is an important governance decision for Michigan’s closely held corporations and their directors. The Sixth Circuit’s decision highlights that closely held corporations considering stock redemptions while pursuing sizable capital investments or strategic partnerships, in particular, should diligently ensure full and frank disclosure to shareholders. That likely includes disclosing relatively early stages of outreach and preliminary negotiations.
Credible third-party interest may need to be brought to shareholders’ attention to satisfy fiduciary duties, notwithstanding that the same information might not meet federal, Delaware or Michigan materiality thresholds for securities fraud.
The Road Ahead
For companies navigating stock redemptions or seeking equity investors, consulting with counsel early and often is key to ensure that fiduciary duties to existing shareholders are met.
