Alaska Shareholder & LLC Dispute Lawyers
Minority owners of closely held Alaska companies can be shut out of decisions, distributions, and jobs. Alaska law gives them tools to fight back.
Quick answer
A qualifying shareholder frozen out of an Alaska corporation may ask the superior court to dissolve it. Grounds include persistent unfairness toward shareholders (AS 10.06.628). The corporation or the majority can avoid dissolution by buying the plaintiffs' shares at fair value (AS 10.06.630). LLC disputes follow different rules (AS 10.50.405).
How minority owners get frozen out
A freeze-out rarely happens in one step. It usually builds over months or years. Common tactics include the following.
- Cutting off dividends or distributions while insiders pay themselves.
- Firing a minority owner from a job in the business.
- Withholding financial information and records.
- Diluting ownership through new share issues.
- Selling assets or making deals that benefit insiders.
- Pressuring a minority owner to sell at a low price.
Corporations
Alaska law lets certain people ask the superior court to dissolve a corporation by verified complaint. They include holders of at least one-third of the shares, not counting shares held by those who took part in the misconduct (AS 10.06.628(a)).
The grounds include persistent and pervasive fraud, mismanagement, or abuse of authority by those in control. They also include "persistent unfairness toward shareholders," and misapplication or waste of corporate property (AS 10.06.628(b)(4)).
A corporation with 35 or fewer shareholders of record can also be dissolved when liquidation is reasonably necessary to protect the complaining shareholder's rights or interests (AS 10.06.628(b)(5)).
Fair-value buyouts
The corporation, or holders of 50 percent or more of the voting power, can avoid dissolution by buying the plaintiffs' shares for cash at fair value (AS 10.06.630(a)). Fair value is based on liquidation value, taking into account a possible sale of the entire business as a going concern. Id.
In practice, many of these cases are about getting a fair price for the minority owner's interest. Valuation experts, financial records, and the history of the business often decide the outcome.
Limited liability companies
Alaska's LLC Act does not contain the same remedy. A member may ask the superior court to dissolve an LLC. The court may do so if it is impossible for the company to carry on its purposes (AS 10.50.405).
LLC disputes often turn on the operating agreement. They also turn on the duties members and managers owe each other. Claims for breach of contract or breach of fiduciary duty may be available even when dissolution is not.
Our experience
Partner Peter Sandberg obtained a $6.2 million arbitration award in a minority shareholder oppression dispute. He has litigated numerous minority shareholder and corporate dissolution actions, including several multimillion-dollar disputes. He also assisted with a large derivative action against an international oil corporation.
Past results do not guarantee a similar outcome in any other matter.
See our complex commercial litigation page for the other business disputes we handle.
Frequently asked questions
Can a minority shareholder force a buyout in Alaska?
The statute does not give a minority shareholder a direct right to demand a buyout. A qualifying shareholder can ask the superior court to dissolve the corporation. The corporation, or holders of at least half the voting power, can then avoid dissolution by buying the plaintiffs' shares at fair value. In practice, many of these cases end in a buyout.
How is fair value determined?
Alaska's statute says fair value is based on liquidation value, taking into account the possibility of selling the whole business as a going concern. Valuation experts often play a large role.
Do the same rules apply to an LLC?
No. The LLC Act allows a court to dissolve an LLC when it is impossible for the company to carry on its purposes. LLC disputes often turn on the operating agreement and on the duties members and managers owe each other.
What documents should I gather?
Articles, bylaws or the operating agreement, shareholder agreements, tax returns and K-1s, financial statements, and any emails about distributions, salaries, or buyout offers.
How do you charge in shareholder cases?
It depends on the case. We take business cases on hourly, contingency, or hybrid terms. We will discuss the options with you before you decide to hire us.
Is there a deadline to bring a shareholder claim?
It depends on the claim. Alaska's statutes of limitations set different deadlines for different kinds of claims, and some are short. Call us early so we can protect your claim.
Sources
- AS 10.06.628 (involuntary dissolution of a corporation).
- AS 10.06.630 (fair-value purchase in place of dissolution).
- AS 10.50.405 (court dissolution of an LLC).
This page gives general information, not legal advice for your situation.