What is a Closely Held Corporation?
A closely held corporation exists when there are a small limited number of shareholders, no ready market for the stock, and substantial majority stockholders participating in the management, direction and operation of the corporation. Shareholders in such a closely held corporation owe each other a fiduciary duty to act with utmost good faith and loyalty towards another. They may not act out of avarice, expediency or self-interest in derogation of this duty to one another, or their duty to the corporation. Donahue v. Rodd Electrotype Co. & New England, Inc., 367 Mass. 578, 585-597 (1975); Vakil v. Anesthesiology Associates of Taunton, Inc., 51 Mass. App. Ct. 114, 118, 744 N. E. 2nd 651 (2001).
In instances involving a closely held corporation, equitable principles are often applied to ensure that the shareholders are dealt with fairly. Buchanan v. Warner, 21 Mass L. Rep. 698 (Nickerson, J., Superior Court 2006).
If you are a minority shareholder in a closely held corporation unsure of your rights call the Law Offices of Alan M. Cohen, LLC at (508) 620–6900 or email Alanmcohen@collections-law.com.