Frequently Asked QuestioNS
You built something together. Now your business partner isn’t returning your calls, has cut off your access to company accounts, and is making major decisions without you. You’re still an owner — but you’re being treated like you’re not. This is called a freeze-out, and it happens more often than you’d think. Here’s what you need to know.
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A freeze-out occurs when a majority owner — or a partner who controls day-to-day operations — uses that control to squeeze out a minority owner. Common tactics include:
In California, these tactics aren’t just unfair — they may be illegal.
California law imposes fiduciary duties on majority shareholders and managing members. Directors and majority shareholders owe a duty of loyalty to minority shareholders — meaning they must act in the company’s and all owners’ interests, not just their own. (Sheehan v. Oblates of St. Francis de Sales (2010) 190 Cal.App.4th 438.) When managing members of an LLC abuse their control, they can be held personally liable for the harm caused. (Feresi v. The Livery, LLC (2014) 232 Cal.App.4th 419.)
Depending on how your business is structured — corporation, LLC, or partnership — California law may entitle you to:
For LLCs specifically, Corporations Code § 17707.03 provides grounds for judicial dissolution when it is not reasonably practicable to carry on the business in conformity with the operating agreement — a powerful remedy when a managing member has gone rogue.
Courts have made clear that majority owners cannot use their control as a weapon. In Bauer v. Bauer (1996) 46 Cal.App.4th 1106, the court recognized that freeze-out tactics designed to force a minority owner to sell at a depressed price constitute actionable oppression under California law.
Your window to act is not unlimited. Breach of fiduciary duty claims generally carry a three-year statute of limitations under Code of Civil Procedure § 338(d). Claims based on written agreements may be subject to a four-year limit under CCP § 337. And while a petition for dissolution under Corporations Code § 1800 has no fixed limitations period, delay can undermine your equitable remedies and negotiating leverage.
Do not wait. Freeze-outs are often designed to pressure you into accepting a bad deal — or to run out the clock on your legal options. The longer you wait, the more leverage you lose.
Before you respond to your partner, before you sign anything, and before you accept any buyout offer, speak with an attorney who handles shareholder disputes and business divorce. The early moves matter enormously.
You should also start preserving evidence now: save emails, texts, financial statements, and any communications that show you’ve been excluded. Courts pay attention to this record.
Most freeze-out situations resolve without going to court. An experienced attorney can often use the threat of litigation — and the strength of California’s minority shareholder protections — to negotiate a fair buyout or restructured arrangement. The goal isn’t always to burn the company down. It’s to get you what you’re owed. But getting there requires moving strategically, not emotionally.
Next Steps
We’ll review your agreements, identify leverage, and create a plan to resolve disputes efficiently and protect your ownership. Contact me today to discuss your business situation and learn how I can help.
Whether you’re facing a shareholder dispute, partnership conflict, forced buyout, or questions about ownership and control, getting the right advice early can make all the difference.
With over 30 years of experience, Gregory Rutchik helps founders, shareholders, and business owners protect their interests and navigate complex business disputes with confidence.
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Licensed in California, Connecticut & New York