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Civil/Commercial Litigation (Lawsuits)/forced proportional loans to company


In a small private corporation with less than 10 shareholders, the majority shareholders wants the shareholder agreement to have a clause that requires all shareholders to make loans to the corporation proportional to their equity share.

Is this permissible, as they can force out smaller shareholders with insufficient means to make loans to sell shares to reduce their equity shares.

Is there any recourse to challenge?

Hello Devon,

Before I respond further to your question, I must make clear that I do not represent you, and cannot give you individual particularized legal advice. No attorney client relationship is created by this email. For legal advice, you should hire your own attorney, and follow their advice. My role with AllExperts is limited to providing general information and suggestions for educational or general knowledge purposes. Before you take any action, consult with your own attorney.

Governance of business organizations is typically regulated by state law, so check with your attorney about the laws in your state.  In my state, Chapter 302A pertains to corporations. Many of the statutes say, "unless otherwise provided in the bylaws" so I suggest you and your lawyer also read those.  302A.501 pertains to "Loans" the corporation can make, and that they may be secured by shares.  302A.403 addresses  "Subscriptions for shares" and how shareholders are to make payment.

302A.473 provides something that might be helpful to you, "Procedures for asserting dissenters' rights".   Additionally, you may find some helpful authority in Schaub v. Kortgard, 372 N.W.2d 427 (Minn.App.1985) wherein discussion can be found of "...the court's authority to disregard form of loan made by one shareholder to corporation and to treat that loan as capital contribution..."  Also, 302A.751 provides for  "Judicial intervention; equitable remedies or dissolution"

Based on what I'm seeing in my state, I think a corporation has a lot of discretion in crafting its bylaws, and that could include methods of shareholder contribution.  Since it sounds like you are in the begining and contemplating a "shareholder agreement" you may not want to invest in this business.  I recommend you speak to your attorney and act in your best legal and financial interest.

I hope this helps, good luck to you.

Morgan Smith
Minneapolis, Minnesota
Conciliation Court * Civil Litigation * Forfeitures * Construction * Family Law

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Morgan Smith


Civil litigation (contract claims, landlord-tenant actions, forfeiture suits, residential construction defect matters), Family law (divorce, custody modifications, child support modifications, and pre-nuptial agreement), new business start-ups, civil forfeiture, asset forfeiture. Please do not submit your question as Private. It is my policy not to answer Private questions from members of the public here on AllExperts; I reserve that function to my private clients. Although AllExperts permits me to change your questions from Private to Public, it is my policy not to do that. I encourage you to resubmit your question as a public question. Your public question has the potential to help others with similar concerns. I suggest that you use a pretend name and otherwise alter sensitive facts that make you inclined to treat your question as Private, and submit your question to me Publicly.


I've been practicing law in the State of Minnesota since 1995. I've worked in skyscraper firms, and now my own small firm in Minneapolis. Past answers from my earlier participation on AllExperts is posted at:

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