Because of the ease with which a majority shareholder can abuse its position, Minnesota law provides that majority shareholders owe minority shareholders the fiduciary duties of good faith, loyalty, fair dealing, and full disclosure. In essence, the majority shareholder must act for the benefit of all shareholders, not just the majority.

It is important to note that Minnesota law also gives any shareholder the right to examine the financial books, stock register, meeting minutes and other important corporate records, and provides a direct right of action, including an award of legal expenses, to enforce these rights.

In addition to these statutory rights, business owners may further define the rights and responsibilities of the shareholder members by contract. Sadly, in small corporations, all to often owners concentrate only on forming the business without any thought to what may occur in the future or how potential disputes may be resolved. When the business is formed, the owners may have a unified vision of what they hope to accomplish. Unfortunately, over time, circumstances have a way of changing what once were uniform expectations and goals. As a result, it is imperative for every corporation to have in place an enforceable agreement between the shareholders that will save legal wrangling if a situation arises.

Situations may be created over simple life changes such as the death of a stock owner, divorce, retirement or a desire to sell their business shares. In each case, it is important for the shareholders to have an agreement that covers each situation and how the corporation will be owned operated. Even a corporation that is running efficiently and smoothly can be thrown into chaos when such life and ownership changes occur and a power struggle ensues. Such agreements are called "Shareholder Control Agreements."

In most case to prevent shareholder disputes, a Shareholder Control Agreement should address the following issues:

1. VALUING STOCK. One of the most important issues is how to value a shareholder’s stock interest. Businesses may be valued in many different ways, including fair market value, book value and based on a percentage of the business’ gross revenue. In some cases, Shareholder Control Agreements specify that business shareholders meet annually to establish a value to be applied until the next meeting. In other instances, specific appraisals and methods of appraisals may be specified in the event of death, divorce or retirement of a shareholder. Depending on the nature of the business one valuation method may be more appropriate than another.

2. RESTRICTIONS ON STOCK TRANSFER. Another extremely critical issue relates to how shareholders’ may restrict the sale or transfer of their shares. A Shareholder Control Agreement can address a myriad of possibilities and may limit the circumstances under which shares can be transferred and give shareholders the right to approve any purchaser. In most cases, the company generally has the first option to purchase the shares that are offered for sale. After the corporation, the remaining shareholders often have the next option. Restrictions on the transfer of stock may address issues related to death, retirement, bankruptcy, divorce and more

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