Reasonable Expectation that Management will Meet with Prospective Purchasers of Shareholder’s Stock
In Ritchie v. Rupe, 339 S.W.3d 275 (Tex.App.-Dallas 2011, pet. filed), the Texas Fifth Court of Appeals held that a minority shareholder in a closely held corporation can have a reasonable expectation that management will meet with prospective purchasers of her stock. Significantly, the Supreme Court of Texas has since granted petition for rehearing and review. If the petition for review is granted, it will be the first shareholder oppression case heard by the Court.
In Ritchie, there was no shareholders’ agreement in place restricting the minority shareholder’s right to sell. Initially, the shareholder, in an effort to sell, offered the stock to the corporation, but rejected the amount that the corporation was willing to pay as substantially below market. The shareholder then began to seek third-party purchasers through a broker, but the broker was informed that company management would not meet with any prospective purchasers. This made the stock virtually unmarketable, since it was unlikely that anyone would buy stock in a closely held corporation without first evaluating and obtaining information from management.