Shareholder duties to other shareholders

Question 1

Do shareholders owe duty to other shareholders? General rule

Answer 1

NO, no duty

Question 2

Controlling shareholder exception: 2 situations

Answer 2

MAY owe fiduciary duties to minority shareholders in two circumstances

1) Sale of Stock to outsider/looter
2) Controlling shareholder transacts with corporation

Question 3

Sale of stock to outsider/looter

Answer 3

Controlling shareholder MAY be liable for damage when he sells stock to outsider with intent on LOOTING OR DESTROYING company

Question 4

Red flags for looter intent

Answer 4

Looters has done it before or gives indication of intent to loot

Question 5

Controlling shareholder transacts with corporation

Answer 5

May be liable to minority shareholders if he receives SPECIAL DISTRIBUTION or conducts MAJOR BUSINESS TRANSACTIONS with corp

Question 6

Who is controlling shareholder?

Answer 6

1) anyone with MAJORITY of shares (50% +1) OR
2) context-dependent, if someone has massive chunk or way outsized relative to average # of shares

Question 7

Do controlling shareholders owe duty of care, duty of loyalty, or both?

Answer 7

BOTH