USA Minority shareholder dividends

[jwhitsett]

I am a minority shareholder in a private corporation. The majority shareholder is a "parent" company that owns 80.1% of the stock. As I understand it, the books of the two companies are consolidated since the majority shareholder company owns over 80%.

Over the years the company has been profitable and issued dividends, but not all profits have been issued as dividends. There is now a large item on the balance sheet titled "Intercompany accounts receivable". I assume this is where the profits not used for other corporate purposes are being accumulated.

I recently saw the balance sheet of the parent corporation and I can tell that it has no where near the cash on it's balance sheet to cover this "Intercompany accounts receivable." I do see where the minority shareholder's interest is listed, but it appears to me the majority shareholder has distributed their own cash out of the company while leaving the minority shareholder's share in the company. Is this proper? It appears to me this is unequal treatment of shareholders.

 

[kirby]

All that sounds bad to me. But this is a legal issue and what you need is a business lawyer who can read your shareholder agreement and see what rights you have per the agreement and per the state or country the business is in. Act now or it appears things will just get worse.

 

[bklynboy]

First, they consolidate because they have control - not because of the 80% - though this is a considerable factor suggesting control.

The intercompany receivable is not where accumulated profits are reported - they are reported in equity as "retained earnings". Also whatever this intercompany receivable is for money owed them otherwise it would be a payable. As such, looking at cash to cover this is irrelevant - they are owed money for this balance.

Since you are not understanding the financial statements I suggest you arrange a meeting or in writing have them explain what is going on. You own a substantial amount of the company and they are required to give you the information you need to understand what is going on.

 

[jwhitsett]

Sorry for my short description of a complicated issue. The receivable is on the books of the "owned" company. It's a payable on the owner's balance sheet. When consolidated they cancel out. But from what I see, the only money left after consolidation is the minority shareholder's interest in the combined company. The majority shareholder's share of the money is not on the combined balance sheet. This seems like unfair treatment of the minority shareholders. Our share is still at risk in the company.

I guess I need to get with an attorney...