The Rights of Minority Shareholders in S Corporations in Arkansas

by Mike Broemmel
Minority shareholders sometimes file a lawsuit to protect their rights.

Minority shareholders sometimes file a lawsuit to protect their rights.

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A minority shareholder of an Arkansas S corporation is one who owns less than 50 percent of the stock of the enterprise. A group of shareholders who collectively own less than 50 percent of outstanding shares are also a minority. Despite their minority status, these shareholders possess certain rights pursuant to Arkansas law.

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Voting Rights

Minority shareholders possess voting rights in Arkansas. The right to vote extends to all matters requiring a shareholder decision. These include issuing more stock, hiring a corporate officer or merging with another business. Minority shareholders vote either in person at a stockholders meeting or by giving a proxy to another shareholder to vote on their behalf in their absence.

Dividend and Other Distributions

When a distribution is made, including the payment of a dividend, minority shareholders have a right to obtain their proportionate share of the funds. They also have a right to obtain a full accounting of any distribution made by the S corporation to shareholders. In conjunction with their right to vote, minority shareholders maintain the right to vote on whether to issue a dividend or undertake some other type of distribution.

Access to Corporate Records

After owning stock in an S corporation for six months, Arkansas law grants minority shareholders the right to examine the books and records of the corporation. This includes everything from financial statements of all types to corporate board meeting minutes. Minority shareholders must request access to corporate records in writing. They legally can designate a lawyer or another individual to review the corporate records on their behalf.

Dissolution of S Corporation

Minority shareholders can file a lawsuit in court to protect their interests. In addition, Arkansas law allows minority shareholders the ability to seek a dissolution. Minority shareholders take this extraordinary step when the majority of shareholders controlling the business engage in actions the minority group deems illegal, oppressive or fraudulent. An Arkansas court makes a final determination on the merits of the allegations made by the minority shareholders.