You helped build the company. Now the meetings happen without you and the distributions have stopped. Scott Templeton is a San Angelo shareholder dispute lawyer who represents minority owners, majority owners, and closely held companies when the people who run a business stop agreeing on how to run it. Templeton Law Firm serves businesses throughout Tom Green County and West Texas.
Call 325-482-9120 or contact the firm online to talk through your ownership stake.
What Is a Shareholder Dispute?
A shareholder dispute is a conflict between the owners of a corporation or the members of a limited liability company over control, money, or information. The classic version involves a minority owner who has been shut out: no financial statements, no board seat, no distributions, and a salary that quietly disappeared.
The other common version runs the opposite direction, where a majority owner discovers a partner has been diverting business, competing on the side, or spending company funds personally.
Can a Minority Shareholder Force the Company to Buy Them Out in Texas?
No, and this surprises almost everyone. In Ritchie v. Rupe, decided in 2014, the Texas Supreme Court declined to recognize a common law claim for shareholder oppression and rejected a court ordered buyout as a remedy. There is no Texas statute that lets a judge order the company to purchase your shares simply because you are being treated unfairly.
That ruling narrowed the field, but it did not empty it. What it did was shift the leverage toward owners who understand the specific statutory tools that remain.
What Rights Do You Still Have as a Minority Owner?
The right to see the books, and it is stronger than most people are told. Section 21.218 of the Texas Business Organizations Code entitles a shareholder to examine and copy corporate records on written demand stating a proper purpose.
You qualify if you have held your shares for at least six months, or if you hold at least 5 percent of the outstanding shares. Those are alternatives, not requirements you have to satisfy together. Even if you meet neither, a court can still order inspection.
Refusal carries a price. Section 21.222 makes the corporation liable for the costs and attorney fees you spend enforcing that right, on top of any other remedy. A properly drafted books and records demand is frequently the single most productive first move in one of these disputes.
Send the demand correctly the first time. Call 325-482-9120.
How Are the Rules Different in an LLC?
Broader access, but the operating agreement can narrow it. LLC stands for limited liability company, and Texas treats its owners, called members, differently from corporate shareholders.
| Corporation | Limited liability company | |
| Governing sections | Business Organizations Code Chapter 21 | Business Organizations Code Chapter 101 |
| Inspection rights | Section 21.218 | Section 101.502 |
| Ownership threshold | 5 percent, or 6 months of holding | None |
| Written demand with a proper purpose | Required | Required |
| Can the governing document limit access | Limited ability | Reasonable restrictions only |
A Texas company agreement can place reasonable limits on what a member sees, but Section 101.054(e) bars it from unreasonably restricting Section 101.502 rights. The document signed at formation often controls the entire dispute years later, so it is worth reading before assuming either strength or weakness.
Do You Have to Send a Demand Before Suing on the Company's Behalf?
Yes, and then wait. When the harm was done to the company rather than to you personally, the claim is a derivative proceeding, meaning you sue on the corporation's behalf.
Section 21.553 requires a written demand filed with the corporation describing the act or omission with particularity, and prohibits filing suit until the 91st day after that demand. The waiting period shortens if the demand is rejected or if waiting would cause irreparable injury.
Once filed, the corporation can ask the court for a stay of up to 60 days to conduct its own inquiry, and it can move to extend that stay in further 60 day increments.
Are the Rules Different for a Small, Closely Held Company?
Significantly, and this is where most San Angelo disputes actually live. Section 21.563 defines a closely held corporation as one with fewer than 35 shareholders and no publicly traded stock. Section 101.463 does the same for LLCs with fewer than 35 members.
For those companies, the demand requirement, the 91 day wait, and the independent director dismissal process do not apply. A court may also treat the derivative claim as a direct action and order any recovery paid straight to you instead of into the company treasury. For a family business, a ranch entity, or a two owner operating company, that provision does more practical work than anything else in the code.
What Does a Freeze Out Usually Look Like in Practice?
A series of small, defensible decisions that add up to one result. Financial statements arrive late, then stop. Meetings get scheduled without notice. A salary is reclassified. Company money moves through a lease, a management fee, or a related company that only the majority owns.
Each step on its own looks like ordinary business judgment. Together they form a pattern, and the pattern is what a court examines. Keeping a dated record of each event is more useful than any single document.
When Will a Court Appoint a Receiver?
Only as a last resort. Section 11.404 of the Business Organizations Code allows a court to appoint a receiver over a company when it is insolvent or close to it, when the governing persons are deadlocked, when their actions are illegal, oppressive, or fraudulent, when company property is being wasted or misapplied, or when shareholders have deadlocked on voting for at least two years.
The court must also find that every other legal and equitable remedy is inadequate. Receivership is real leverage precisely because judges are reluctant to grant it. Suits like these are filed in the district court for the county where the company's registered office or principal place of business sits, which for most San Angelo companies means Tom Green County.
How Long Do You Have to Bring a Shareholder Claim?
Between two and four years, depending on the claim. Fraud and breach of fiduciary duty carry four years under Section 16.004 of the Civil Practice and Remedies Code. Breach of a shareholder agreement or buy sell agreement carries four years under Section 16.051. Conversion of company property carries two years under Section 16.003.
Because a freeze out usually unfolds over months, the date the clock started is often disputed. That question deserves attention early rather than at the end.
What Should You Look for in a Lawyer for an Ownership Fight?
Someone who reads documents closely and knows when to push. Ownership disputes are won on the record and on timing. I have practiced contract and business litigation in West Texas since 1998, I grew up in San Angelo, and I handle these matters personally rather than staffing them out.
Cases are filed in the 51st, 119th, 340th, or 391st District Courts of Tom Green County. Related work includes the firm's partnership disputes practice and the full range of commercial litigation handled by the firm.
Bring your formation documents and the last two years of financials. Call 325-482-9120.
Your Name Is Still on the Company
An ownership stake does not stop being yours because someone changed the locks on the information. The statutes are narrower in Texas than in most states, and that makes using the right ones, in the right order, the whole game.
Templeton Law Firm works from 905 S. Abe Street in San Angelo, weekdays from 9 AM to 5 PM, in English and Spanish. Fee arrangements for business matters are discussed during your consultation. Call 325-482-9120, email scott@templetonlawfirm.com, or schedule a consultation about your ownership dispute.
Shareholder Dispute Questions Texas Business Owners Ask
The other owners stopped my distributions. Is that illegal?
Not by itself. Texas gives boards and managers wide discretion over whether to distribute profits, and a decision to retain earnings is usually protected by the business judgment rule, meaning courts will not second guess an honest business decision. It becomes actionable when the retention is not applied evenly to every owner.
Can they remove me as an officer and still leave me with my shares?
Yes. A title, a paycheck, and an ownership stake are three separate things in Texas. Losing the first two does not cancel your equity, and your shares keep their voting and inspection rights. This is one of the most common misunderstandings in a freeze out, and it works against the person who assumes their stake vanished with their job.
We never signed a shareholder agreement. Is it too late?
Not necessarily. Owners can adopt a shareholder agreement, an LLC company agreement, or a buy sell agreement at any point they can still reach consensus, and doing so during a manageable disagreement is far cheaper than litigating without one. Where consensus is already gone, the statutes above become the framework instead.
Will filing suit destroy the business?
It can, which is why the sequencing matters. Many of these matters resolve through a records demand, a valuation, and a negotiated exit without a petition ever being filed. Litigation is a tool for when the other side will not engage, not the automatic first step.