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Pennsylvania Supreme Court Sets New Precedent that Allows Minority Shareholders to Oppose Mergers in Extraordinary Situations

November 29th, 2012

In a recent landmark decision by the Pennsylvania Supreme Court, minority shareholders of Pennsylvania corporations can now oppose a merger that negatively impacts their shareholder interests, even after the merger has been finalized.  Prior to this decision, the Pennsylvania Business Corporation Law of 1933 set the standard for shareholder opposition.  According to the law, minority shareholders had no post- merger recourse, even if they believed fraud or fundamental unfairness had taken place during the merger process.  Amendments to the law were made in the 1980’s that allowed shareholders to seek judicial intervention to assure a reasonable assessment of the value of their corporate shares, but still denied the right to any other post-merger lawsuits. The recent Pennsylvania Supreme Court decision now allows shareholders to bring suit, post-merger, in cases where fraud and fundamental unfairness have taken place.

Burden of Proof Rests on Opposing Shareholder in Post-Merger Lawsuits

Even with the new interpretation of the law, the burden of proof that fraudulent or fundamentally unfair behavior rests on the shoulders of the minority shareholder.  The Pennsylvania Supreme Court’s decision to allow post-merger opposition has set a new precedent, but it does not define what is considered fraudulent or fundamentally unfair action.

The only stipulation clearly addressed thus far is that the post-merger opposition must be based on exceptional circumstances of fraud or fundamentally unfair issues.  All matters involving fair market value of stockholder shares must still be handled in the appraisal process.  The shareholder bringing suit must prove that the injustice suffered cannot be remedied by the financial appraisal process.  It is up to minority shareholders to prove that the injustice suffered by them resulted from fraud or fundamental unfairness, rather than having the majority shareholders proving that they acted fairly.

Philadelphia Business Disputes Law Firm of Sidney L. Gold & Associates Provides Representation to Minority Shareholders

Bringing a post-merger suit is not an easy process.  The laws are strict, and the new precedents are vague, which means that you need an experienced attorney at your side.  The Pennsylvania employment law attorneys at Sidney L. Gold & Associates have vast experience in all aspects of employment and business law, including minority shareholder and business disputes.  Our team of lawyers is dedicated to helping our clients seek justice when they have been treated unfairly.  We understand the impact that the recent Supreme Court of Pennsylvania decision has on your right to bring suit.  Our business dispute lawyers are committed to helping you seek justice and recover the compensation you are entitled to under Pennsylvania law.

The renowned Philadelphia law firm of Sidney L. Gold & Associates is conveniently located in Center City, serving clients throughout the tri-state area of Pennsylvania and New Jersey.  If you are a minority shareholder that has been treated unfairly during a merger, suspect that fraud occurred in the merger process, or have suffered some other aspect of shareholder oppression, contact our Philadelphia shareholder disputes attorneys today to see how we can help you.  Call us at (215) 569-1999, or contact us online to learn more about our experience with minority shareholder litigation and employment law.

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