The Iowa Supreme Court said today it was establishing guidelines for determining shareholder rights in closely held businesses after remanding a Madison County case back to a district court.

 

The lawsuit involved cousins Robert and James "Jack" Baur, who inherited their fathers' shares in Baur Farms Inc., a large cattle and row crop operation in Madison County.

 

Jack Baur contended that his rights as a minority shareholder had been suppressed over the two decades that he attempted to sell his shares.

 

The cousins disputed the value of the farm, with Jack claiming a higher value and his cousin claiming a lower value.

 

Because Jack was a minority shareholder, he may have been blocked from realizing his value in the operation, the court said. The family business did not pay dividends. The court ordered the Madison County District Court to determine whether Jack's shareholder rights had been suppressed.

 

"We need not catalogue here all the categories of conduct and circumstances that will constitute oppression frustrating the reasonable expectations of minority shareholders' interests," the court said. "We hold that majority shareholders act oppressively when, having the corporate financial resources to do so, they fail to satisfy the reasonable expectations of a minority shareholder by paying no return on shareholder equity while declining the minority shareholder's repeated offers to sell shares for fair value."