Closely Held Corporation Can Cause Legal Issues and Headaches

Closely held Massachusetts corporations (or often referred to as closely held business) are typically entities that are controlled and owned by a small, limited number of persons.  Closely held corporations are often associated with a family business (a/k/a family owned business) and the concept has expanded to include small groups of partners who were at one point friends, colleagues, or co-workers. A typical closely held business is controlled by a select group of persons who play a significant role on the board of directors and as key manager of the company. The affairs of a closely held business are private, and ownership interests are not publicly traded.

The downside of closely held businesses is that they very frequently entail disputes among the owners. One recent example of the severe issues that a closely held business can face is the recent dispute in 2014 involving Market Basket.  This popular supermarket chain operates approximately 75 stores in New England, and was primarily owned by two cousins. An internal dispute arose among the primary shareholders and key board of director members that led to a very public dispute regarding control and ownership of the entity.

This is one example of where disputes can arise when shareholders disagree on the control, discretion and decisions of the board members and officers. Shareholders can also be dissatisfied with the amount of profits earned by the company, as well as question the decisions of the Board and officer that caused the company’s poor financial performance.  Or in other situations, if a company is being sold or liquidated, the shareholders may have concerns about the valuation of the company and how shareholders will be treated.  And finally, significant issues can arise when an owner wants to exit the business and decides to sell his or her stock.

The Law Office of Stefan Cencarik, PLLC handles various business litigation and disputes, and provides related consulting services, mostly involving closely held businesses. Rather filing a lawsuit, it is best to initially explore various dispute resolution alternatives, such as informal negotiation and mediation. If you are experiencing issues with a closely held business, please contact an experienced and skilled business lawyer at 617-669-9780.