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Texas Supreme Court Rejects Minority Shareholder Oppression

The concept of "majority rules" is a concept with which we are all no doubt familiar. But what happens when the majority owners of a closely held business exploit their power over minority owners in an abusive or oppressive manner? Is there no standard of fairness or other limitation on the power of the majority when it comes to corporate governance? Over the last two decades, some Texas courts have answered those questions in the affirmative by acknowledging the existence of a cause of action for what has been called "minority shareholder oppression". Courts have even gone so far as to require majority owners to purchase the ownership interests of affected minority owners in some of those cases. However, the existence of this amorphous and often-debated area of corporate law may be over.

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