We face some of the most peculiar economic circumstances in the history of the world. Governments are giving away money to businesses, people are spending like crazy via the internet and at "necessary" places of business like hardware stores. But, I haven't been able to get a haircut in weeks despite my stylist's chair being 4-6 feet away from any other chair! Just this weekend I went from my home in Hugo to Maplewood to get some tools and it was as packed as ever. But, I drive past where I get my hair cut in Lino Lakes and there's not a soul to be found.
In these times, economic difficulties create extreme stress. Stress, in turn, leads to bad decisions. If you are wondering what your business partners' obligations are to you. Shareholders of a closely held corporation (less than 50 shareholders) have a fiduciary duty to observe “the highest standard of integrity in their dealings with each other.” Evans v. Blesi, 345 N.W.2d 775, 779 (Minn. Ct. App. 1984), review denied (Minn. June 12, 1984). Fiduciary duty includes the “duty to deal openly, honestly and fairly with other shareholders,” id., and to “act with complete candor with each other,” Gunderson v. All. of Comput. Prof’ls, Inc., 628 N.W.2d 173, 186 (Minn. Ct. App. 2001), review granted (Minn. July 24, 2001), appeal dismissed (Minn. Aug. 17, 2001). The law holds directors and officers of closely held corporations to the higher standard that applies to shareholders of a closely held corporation: their fiduciary relationship “imposes the highest standard of integrity and good faith.” Wenzel v. Mathies, 542 N.W.2d 634, 641 (Minn. Ct. App. 1996), review denied (Minn. Mar. 28, 1996).
In other words, the directors and officers in a closely held corporation or limited liability company owe a greater obligation to the company. Ostensibly the theory is that because there are fewer persons of authority, they are more important, more impactful on the well-being of the company.
What you should expect from your co-owners is the highest level of performance, the highest level of candor, and loyalty. If you are not getting that, it is time to take action. That initial action is likely a board meeting to air concerns. If nothing changes, then more dramatic steps follow.
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