Our client was a minority shareholder in a family manufacturing business which had been established by his father 40 years ago and had a successful market niche in its industry. In 1988, the father transferred shares in the business to our client and his sister as part of an estate freeze, giving each a minority interest.
All three shareholders worked in the business in positions of responsibility but it was assumed that our client would become the president when his father retired. In 1996, the father suffered strokes and became increasingly unable to play an active role in the business. Our client became the defacto president. In 2000, following our client’s divorce, he established a serious romantic relationship with a woman his family didn’t like. On the eve of our client’s wedding to his second wife, his father announced that our client’s sister had been appointed president of the business. In the ensuing years, our client’s salary and responsibility in the business was driven in part by the family’s disapproval of his new wife. Eventually, the poisoned family atmosphere caused our client to suffer an emotional breakdown. He became disabled and left the business.
In the ensuing litigation for seeking oppression, breach of trust, fiduciary and punitive damages and compensation for his shares, the father demanded that his shares be returned on the basis that they were not intended to be compensated until after the father died. Further, the sister was reluctant to provide complete financial disclosure. Litigation was intensely conducted over a period three years. During this time, we also had to instruct real estate appraisal and business valuation experts and consider the impact of their reports. After months of extensive negotiations, a hard-fought settlement was reached. Tax issues arose in the implementation of the settlement which required negotiations with tax counsel and accountants and further rounds of intense settlement negotiations. With the benefit of our advice, relentless negotiations and determined strategy, our client recovered the value of his shares and damages. The settlement was timely because in current economic conditions, the future prospects of the business is much worse than it once was and our client might have recovered less if the case were forced to go the trial.