Corporate Governance Disputes

Shareholder disputes in closely held corporations frequently arise from disagreements over management decisions, dividend policies, compensation of officer-shareholders, or alleged misuse of corporate assets. Texas courts recognize both direct causes of action—where the harm is individual to a shareholder—and derivative causes of action brought on behalf of the corporation as a whole. Remedies may include injunctive relief, buyout orders, appointment of a receiver, dissolution of the entity, and compensatory damages.

Disputes among members of a limited liability company can arise over management authority, capital contributions, profit distributions, or the admission and expulsion of members. Texas LLC governance is primarily governed by the Texas Business Organizations Code (TBOC) and the company’s governing documents. In the absence of comprehensive operating agreement provisions, statutory defaults apply, and courts have broad equitable authority to fashion remedies in the event of deadlock, misconduct, or oppressive conduct by majority members.

Corporate or LLC deadlock occurs when the owners or managers of an entity are evenly divided and cannot make decisions required for the business to function. The Texas Business Organizations Code provides judicial remedies for deadlock, including the appointment of a provisional director or manager and, in extreme cases, judicial dissolution of the entity. Proactive planning—including tie-breaker provisions and dispute resolution procedures in governing documents—is the best defense against deadlock, but when it occurs, swift legal action is often necessary to protect all stakeholders.

Shareholders and LLC members in Texas have statutory rights under the Texas Business Organizations Code to inspect the entity’s books and records for a proper purpose. A records demand is often a precursor to litigation, serving as an investigative tool that allows investors to examine potential wrongdoing or mismanagement before filing suit. Entities receiving such demands must carefully evaluate their obligations under the TBOC, including the scope of inspection rights, the permissible form of production, and the appropriate response timeline.