 to direct or order that the stakeholders would be voted for the dissolution of the

company, such as extraordinary step may not be necessary for the achievement or
successful for a fair trial. Flexibility of the remedy, was to tailor all the facts and
circumstances of the case, including the both the parties with good faith, interests and
motivations, if any is the key for the court to come for the conclusion in the cases of
the corporations.

 And also they held that the conflicts (or) disagreements (or) disputes among the
members of the company (or) corporation don’t lead to a ground for the dissolution of
a corporation unless and until it goes as far as to render it impossible to carry on the
business (or) management of the corporation. So, that this is one of the situation at
which the corporation gets the chance of dissolution.

 When the question really is, that are the directors of a company were exercising an
honest business in a corporation which they can gather enough material evidence to
defend themselves, or can the minority shareholders show that they are obey to others
as unquestioningly to management of their decision and have made a judgement.

 The fact that the commissioner of Internal Revenue has said that (or) felt that if the
earnings are retained beyond the reasonable needs of the business of the corporation,
then the minority shareholders can raise their opinion against the director’s
mismanagement which even affects their share in the corporation.

 And the final suggestion given by the author is that “the disputes may arise between
both the majority and minority shareholders. Then he suggests that they both have get
into a conclusion as to both have to get some benefit by electing the members of the
directors on a good faith. But, as a lawyer by binding on the professional ethics, at the
situation which side client you get, have to do justice as which you can do.

What are the situations that majority will squeeze and freeze the minority shareholders,
and what are the rights available to them at that situation:-
Any group within a corporation which controls maximum shares of the stocks in a company
and to elect a majority of the directors and also who dictates the result of the stockholders
votes, through the different ways by using variety of devices, and the maximum power to
benefit members at the expenses of the minority shareholders.

Moreover, most of the minority shareholders were unaware of the protection provided by the
law against the unlawful (or) unfair treatment of them. And also most of them don’t know the
exact policies which are done (or) going to be done in there company until and unless they
get any problem or doubt out of that policy due to management fails to make adequate reports
to the stockholders.

So, all these are the factors to combine and form as a result of this most of the minority
shareholders position in a company was unknown and are insecure and also financially they
are in dangerous one.

So, to eradicate this type of circumstances which occur on the minority shareholders in a
company the court have brought to protect the rights of the minority shareholders at the hands
of the majority shareholders, and give them a equal value as all other members in a company.

But, the court has power to protect the minority shareholders only when acts of the majority
were characterized as abusive, unreasonable or arbitrary in a bad faith against them.

And the burden of proof mostly lies on the complainant who brought the case against the
majority shareholders. By proving that the majority shareholders are not at all taking care for
the decisions of the minority and not taking the interests while doing many other things on
behalf of the company and getting (or) sharing the profits among themselves with oppressing
the minority shareholders rights.

There are so many situations (or) circumstances at which the majority shareholders will
always squeeze (Or) freeze the minority shareholders. But these are some of them:-

a) Dividend Withholding & High Salaries

b) Merger
c) Sale of assets
d) Issuances of stock
e) Stock dividends
f) Bankruptcy
 g) Charter Amendments.

So, the above are some of the circumstances at which most of the majority shareholders were
freezing the rights of the minority shareholders.

And now, we will would like to go in depth of each and every circumstance and analyze how
majority shareholders were depriving the rights of the minority shareholders and find out
what the relief (or) remedy available to the minority shareholders will get when they face
such kind of a circumstance in their corporations.

1. DIVIDEND WITHHOLDING & HIGH SALARIES:-

So, here if we observe, the duty of the declaration of dividends is within the matter of sole
discretion of the board of directors was going to be in the hands of the majority shareholders
remain in the treasury of a company and getting more benefit among that profits is under the
majority shareholders.

This was one of the major effect which leads to lower the market value of the stock, which in
return, it keeps pressure on the minority shareholders to sell their shares to the majority and
their ultimate goal is to acquire the complete ownership of the corporation with an unfair low
price. So, that this leads to the depriving the minority shareholders of much of its original
investments, and also the opportunity to participate in a going concern.

At this circumstance, the evidence of a conflict of interests between the members of the
majority and minority shareholders has also been deemed to be satisfactory evidences in the
dividend cases.

Court will access the minority shareholders request upon a showing that the majority
shareholders are withholding dividends solely to get the advantages of personal tax. So, at
this situation by proving this evidences the court will mostly gives its decision on behalf of
the minority shareholders. So, by this opportunity provided by the court, the minority
shareholders rights were protected under the dividends withholding circumstances.

If once the minority shareholders protest that if it has convinced a court that it should thus
intervene in the affairs of the company. Several remedies were available to the minority
shareholders. Finally, the court has power to adjust the unreasonable compensation to
minority by the majority shareholders.
 2. MERGER:-

When there is a amalgamation (or) combination of two companies is called as “merger”. A

corporate merger can also be one of the main circumstances where majority shareholders will
freeze out the minority shareholders rights and preferences of their share conduct in the
company.

The justification is that one who buys the shares in a corporation will understand that his
rights and preference will be altered by the majority shareholders of that company.

In the case of “Matteson v. Ziebarth”, the court held that the devasting fashion in which the
merger will be used either to oust the minority shareholders or to deprive his role in the
management of the corporation.

At this case, a minority shareholder, by invoking the common law rule, blocked a proposed
sale of all the corporation’s outstanding shares by refusing to give the consent for the
transaction proposed by the majority shareholders. Then to deprive the management rights of
minority this majority shareholders has organized the another dummy company, and also
purchased all of its outstanding shares in that and made themselves directors of that dummy
company.

Shortly thereafter, by having 2/3rd of voting, the majority shareholders of the previous
corporation have approved the merger with the dummy corporation. This was done with the
fraud and unfairness to freeze the powers & rights of minority shareholders in the decision
taking in case of merger. This case was one of the examples for the freeing of the rights of
minority shareholder during the merger takes place in the corporation.

In other case “Federal United Corporation v. Havender”, also the court has held that the
merger can also be a main device for erasing the dividend, especially when this type of effect
can’t be achieved by charter amendment.

Based on this type of Situations, in the modern corporation statutes, has facilitating
fundamentals of corporate changes, such as merger, and have incidentally, made it very easy t
victimize minority interests in the corporation. To mitigate this danger, at least 42 states have
adopted the appraisal statutes which were designed to give some of the measures for
protection of the minority shareholders.
And also this change in the statutes has provided the right to the minority shareholders can
persuade the court to enjoin (or) set aside the merger done by the majority shareholders, but
only with the condition is that the plaintiff has to prove that the specific merger was done
illegally or with that it amounted to fraud.

In some of courts it states that they will inquire in to the unfairness of that merger agreement
if particular circumstances seems to warrant close scrutiny, but the courts will set aside the
merger only when that unfairness is so patent as unremarkably to indicate that it is with bad
faith and indifferent to the rights of the minority shareholders in a corporation. And some
other cases, it can be find on the basis of the invalidation of mergers on “constructive fraud”
involvement.

3. SALE OF ASSETS:-

The meaning of the sale of assets is that “it is a non recourse cash sale of assets from a bank
or to any government agency to a third party. And also the main purpose of this is to increase
the cash flow, reduce the bad debt risk and also from liquidation of assets in a corporation.

And as per the common law rule which requires an unanimous shareholders votes for a sale
of all the assets of a going concern may also have given the minority shareholder
disproportionate protection.

For an example, the majority shareholders of a company A, whom own shares in company B.
In exchange to that the shares of the company B might then be issued to the company A,
which subsequently would liquidate by allotting company B shares to its shareholders in
return for their company A. And then the unwanted minority shareholders may find that the
company B share is quite different from his former share in company A. This is one of the
examples for the deprivation of rights of the minority shareholder in the sale of assets
circumstances.

The remedy available to the minority shareholder at this situation is that to obtain equitable
relief if the degree of proof, to show that the case is of fraud, will be satisfied. So, that the
court can grant the remedy in favour of the plaintiff that is the minority shareholder.

4. Issuance of stock:-

This is also comes under the one of the corporate squeeze through which the sale of treasury
stock takes place.
This is very usual technique, that it reduce the minority shareholder’s interest in the company
through either by issuing of stock at lesser than fair market value, without offering any of the
shares to the minority (or) by issuing stock at a time when this minority shareholders were
financially unable to purchase the part of issue.

So, that the minority shareholders will buy large quantities of such a share, and the majority
can acquire maximum shareholders interest in any of the corporate surplus.

So, to eradicate from this type of circumstance the minority can seek for the judicial
enforcement of the fiduciary obligations.

5. BANKRUPTCY:-

This is another unique freeze out device is the filing of a voluntary petition in bankruptcy
with the intention to outbid the minority shareholders interests at this type of a sale.

In the case Porterfield v. Gerstel, the court held that, “at this type of situation, the only
remedy that it is available for the minority shareholders, is that their ability to prove that the
voluntary petition was filed in a fraudulent attempt for depriving the rights of them in a
company”.

6. CHARTER AMENDMENTS:-

This is another form of a device where the majority shareholders can squeeze and freeze the
rights of the minority shareholders.

The majority shareholder with the intention to deprive the rights of the minority, will get the
highest votes, and starts to amendment the charter of a company.

But, if the evident that the possibilities for use of charter amendments to helpless, by this
unfavourable amendment. They may can block the amendment made by the majority
shareholder by proving that the amendment was unconstitutional to the share capital of a
company or as that the majority shareholders, has violated the fiduciary duty of the minority
shareholders.

And there is another remedy available to the minority shareholders is to prove that the ground
on which all the formalities required by the contract for passage of this amendment have not
been observed, or that this amendment was in question is prohibited by a specific provision in
the available contract of a company.