In Heidecker Farms, Inc. v. Heidecker, the Iowa Court of Appeals identified several different actions / inactions that may arise to shareholder oppression in Iowa. The court began by explaining shareholder oppression generally, stating: “Oppressive conduct ‘is an expansive term used to cover a multitude of situations dealing with improper conduct which is neither illegal nor fraudulent.'” The court then identified / referenced ten (10) different characteristics of shareholder oppression in Iowa:
- Majority shareholders terminate a minority shareholder’s employment;
- Majority shareholders deprive minority shareholders of corporate offices;
- Majority shareholders prohibit a minority shareholder from otherwise participating in the business;
- Majority shareholders refuse to declare dividends, but provide themselves with high compensation (including bonuses), leaving minority shareholders who do not hold corporate office little or no return on their investment;
- Failing to maintain proper and accurate books and records;
- Commingling a director or majority shareholder’s assets with those of the corporation;
- Diverting the corporation’s assets into the director or majority shareholder’s own business operation(s);
- Establishing a competing business;
- Failing to provide minority shareholders with proper notice of board meetings; and
- Causing the corporation to sell its assets at an inadequate price to majority shareholders.
Generally, courts analyze challenged conduct in the aggregate and look to the totality of the circumstances to determine whether shareholder oppression is or has occurred. If you are curious about whether certain conduct qualifies as shareholder oppression, or if you are concerned about whether you are being oppressed, an attorney with experience in this area of the law should be able to provide guidance based upon the unique facts of your case. To read more about shareholder oppression click here.
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