Yes, a minority owner can be fired, but only if they also hold an employment position within the company. Their termination would be from their role as an employee, not from their status as an owner (shareholder) of the company.
While being a minority owner grants an equity stake in the business, it does not automatically guarantee employment or protection from termination in an operational role. Majority owners often hold significant control over the company's daily operations and strategic decisions, which typically includes hiring and firing employees.
Understanding Ownership vs. Employment
It's crucial to distinguish between owning a part of the company and being employed by the company:
- Ownership (Shareholder): As a minority owner, you possess shares or equity in the company, giving you a right to a portion of its profits and assets, and often some voting rights. Generally, you cannot be "fired" from your ownership stake unless specific pre-agreed terms (like buy-sell agreements, or severe breaches of foundational agreements) are triggered.
- Employment (Employee): If a minority owner also works for the company in a specific role (e.g., CEO, manager, sales director), they are an employee. Like any other employee, their employment can be terminated based on company policy, performance, or strategic decisions made by the majority owners.
Tactics Majority Owners May Employ
Majority owners, by virtue of their controlling stake, can sometimes take actions that significantly impact minority owners, especially if the minority owner also works for the company. These actions may include:
| Type of Action | Description |
|---|---|
| Termination of Employment | If a minority owner is also an employee, majority owners can terminate their employment. |
| Exclusion from Accounts | Majority owners might gain control to lock minority owners out of company bank or other accounts. |
| Profit Reinvestment | Profits may be reinvested back into the business instead of being distributed among all shareholders. |
These actions can be part of an effort by majority owners to impose their will or streamline operations, but they can also lead to disputes if minority owners feel their rights are being infringed upon.
Protecting Minority Owner Rights
While an employment position can be terminated, minority shareholders do have certain rights and avenues for protection, especially when facing oppressive actions. These often stem from:
- Shareholder Agreements: A well-drafted shareholder agreement can outline specific conditions under which an owner (even a minority one) can be terminated from employment, how their shares will be handled upon termination, and mechanisms for dispute resolution.
- Fiduciary Duties: Majority owners and company directors owe fiduciary duties to the company and, in some jurisdictions, directly to minority shareholders. This means they must act in the best interest of the company and not exploit their position to unfairly disadvantage minority shareholders.
- State Laws: Many states have laws that protect minority shareholders from "oppressive conduct" by majority owners, especially in private companies where selling shares is difficult. These laws can provide remedies for unfair actions.
- Access to Information: Minority owners typically have the right to inspect company books and records, which can help them monitor the company's financial health and management decisions.
Understanding the difference between an ownership stake and an employment role is key for any minority owner. While employment can be terminated, the ownership stake itself usually requires more specific legal actions or agreements to be divested.
