Board Fight

Board Fight

Brief Overview

Boards of Directors have a fiduciary duty to do what is best for the shareholders. Even if they make bad decisions, they can usually hide behind the claim that it was in their best business judgment. Shareholders that lose money on an investment can sue the directors, if the shareholders can demonstrate that the company did not do with the money what was originally promised when the shares were purchased.

 

Situation

A group of Directors that controlled a slight majority within the Board decided to remove the minority Board Members and change the direction of the bank. As a result of this change, the minority members of the Board of Directors and a significant amount of the shareholders wanted to sell their stock. The minority stockholders considered suing the company’s directors if they were forced to take a loss.

 

This situation created a difficult dilemma for the company as it could not justify buying the stock directly and it was having difficulty finding enough buyers at a price that was satisfactory to the minority shareholders. Even though they were minority owners, they owned a substantial amount of stock.

 

Why Goff Associates, Inc. (GAI)?

GAI has substantial experience in negotiating complex agreements, experience with company valuations, an understanding of securities laws, and experience dealing with shareholders.

 

Results

GAI opened up a channel of communication between the two groups and worked through a series of alternatives until an acceptable alternative was determined. The solution was found in a complex Texas law regarding the purchase of stock from minority shareholders during a merger. A price was agreed upon and the shares were purchased. The stock sellers were able to achieve a gain in a down market, the company was able to reduce the risk of litigation from disgruntled shareholders, and the remaining shareholders benefited from the reduction in the number of outstanding shares.

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