Shareholder Rights and Disputes

Posted on : October 16, 2014

Investors who purchase shares of corporate stock have certain rights. Although they typically have no say in the control or direction of the company, their investment is at risk if the company fails. Fairfax business lawyers see disputes arising when failure becomes a real possibility.


Among the main rights of a shareholder are:

• Ownership of a portion of the company. Based on the performance of the company, the value rises or increases with the price of the stock. If liquidation becomes necessary, the value becomes a portion of the company’s assets.
• The right to vote on major company issues. The election of directors, the approval or disapproval of a merger or a liquidation are examples, which the shareholder can do directly or by proxy.
• The right to trade shares. Liquidity is a primary advantage of owning stock.
• The right to receive dividends. A company’s directors and management make the decision whether to reinvest profits in the company or pay dividends. If dividends are declared, the shareholder has a right to their portion.
• The right to inspect company books and records, including public filings and the annual report.
• The right to sue the company for wrongful acts by the directors and officers of the company. When disputes arise, legal action is a possibility.

These rights are general in nature; to fully understand all the rights of a shareholder of a particular company, it is necessary to examine the company’s charter and by-laws.


Issues that arise may have their genesis in the way a company was initially set-up, but it is more likely that problems of mismanagement or misconduct are the cause. Commonly observed disputes include:

• Minority shareholder oppression
• Disputes over dividends
• Disputes over executive compensation
• Breach of fiduciary duty
• Intellectual property issues
• Fraud and deceit
• Business succession disputes
• Shareholder buyouts

Contact Fairfax Business Attorney for Legal Advice

If you believe your rights as a shareholder have been violated, you need to explore your options. It may be possible to negotiate a resolution or the intervention of the courts may be necessary. Call the Fairfax business lawyers at the Law Offices of Paul S. Schleifman at 703-528-1021.

Fraudulent Misrepresentation

Posted on : October 9, 2014

A misrepresentation is a false statement of fact that induces another to act to their detriment. There are three types of misrepresentations that give rise to civil claims: innocent misrepresentation, negligent misrepresentation and fraudulent misrepresentation. Arlington business lawyers will explain that the latter is the most serious.

The Elements

Arlington business lawyers will explain that to prove fraudulent misrepresentation the following elements must be established:

• A person made a false statement of material fact
• with the knowledge the statement was false and
• with the intention that another would reasonably rely on the statement,
• which resulted in harm to the person who acted on reliance on the statement.

The proof of each element, however, depends on specific legal standards.


A cause of action does not arise merely with any false statement; the false statement must pertain to a material fact or one that would make the difference for a reasonable person to act or not act. For example, say the seller of a house tells a prospective buyer the house comes with the washer and dryer included. After the transaction is completed, the buyer moves in and discovers the washer and dryer were sold to another party. This is not a fraudulent misrepresentation because no reasonable person would believe a washer/dryer was material to the sale of a house.


The statement must be a fact, not an opinion. Saying, “This is a great house, you’ll love it,” for instance, is an opinion.

Reasonable Reliance

The person who relied on the statement has a duty to make reasonable inquiries or investigations into the truthfulness of the statement under the circumstances. If it is something that is readily discoverable, it is unlikely the court will find fraudulent misrepresentation.


The person who relied on the false statement, the plaintiff, must demonstrate an actual, ascertainable loss for the cause of action to proceed. In addition to recovering the actual losses sustained by the plaintiff, punitive damages may be awarded in particularly egregious cases.

Contact Arlington Business Attorneys for Legal Advice

If you have been the victim of deceit or misrepresentation in a business transaction, you have recourse. Call Paul S. Schleifman at 703-528-1021.

Breach of Fiduciary Duty

Posted on : October 2, 2014

Breach of fiduciary duty is a broad concept that covers many different types of business relationships. Once a fiduciary relationship is established, an Arlington business attorney emphasizes that the fiduciary has a duty to act in the best interests of the other person. A fiduciary duty is one of the highest standards imposed by law.

Creation of a Fiduciary Duty

In some instances, a fiduciary duty is imposed by statutory law. Examples include a partner and a partnership or a director and a corporation. In other cases, a contract between parties establishes such a duty, as in an attorney-client relationship. While these examples are for the most part commonly understood, other fiduciary relationships are created by the circumstances of the business relationship or financial transaction between two parties. This type of fiduciary duty is less obvious and may be a matter of fact that needs to be judicially determined

Issues to Consider

When a court looks to whether a breach occurred, it will consider:
• Whether a fiduciary duty existed at the time of the alleged misconduct
• If a fiduciary duty existed, what was the nature and extent of that duty
• Determine if the duty and the breach occurred within the scope of the relationship

Although there is no clear cut way to determine that a fiduciary duty has been established, some indications are superior business knowledge and acumen of one party, the reliance of one party on the other and the dominance of one party over the other.

Common Breaches

There are many ways the trust placed in a fiduciary can be violated; among the more common examples are:

• Misrepresentation as to a statement of fact
• Omission as to a statement of fact
• Failure to disclose
• Misuse of confidential information
• Misappropriation of funds
• Self-dealing
• Usurpation of corporate opportunity
• Neglect

Contact an Arlington Business Attorney for Legal Advice

A successful claim of a breach of fiduciary duty may result in a recovery for loss of income, loss of business opportunity and perhaps punitive damages where appropriate. If you believe you have been victimized, call Arlington business lawyer Paul S. Schleifman at 703-528-1021.

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