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Clearly, no other person will purchase the minority interest, hence the minority Shareholder is in a powerless circumstance regardless of the ownership of stock. Presuming  super mike allen  is Sub S in tax status (in which case each shareholder is taxed on corporate revenues personally) then the circumstance for the minority Investor can be desperate since the majority Shareholder can reward him or herself enough to pay the taxes, but not declare any dividends and the minority Shareholder remains in the difficult scenario of paying taxes on cash he or she never even gets! (Thus if a Sub S business earns $100,000 in net earnings and you own thirty percent of the stock, you must pay taxes on $30,000.

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If the company states no dividend, you still need to pay that tax.) The above "capture play" on a minority Shareholder is an extremely common maneuver in corporate battles and eventually forces the minority shareholder to offer his/her interest at any cost to the bulk Investor in an effort to prevent economic ruin.

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Even more, under the guidelines of cumulative voting, a minority shareholder with a certain quantity of stock can ensure him or herself of being able to choose a minority on a Board of Directors (at least elect one out of 3) even if control still stays in the hands of the bulk investors.

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If you are destined to end up being a minority Shareholder, you should safeguard yourself in other methods: either by developing a special kind of stock structure allowing particular veto rights or by getting legal rights in a different written contract, either of employment, or in terms of who will serve on the Board or serve as an Officer.

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It is therefore at the formative stage of the corporation where minority shareholders should either seek some kind of increased share holdings or contractual defense, as discussed at the end of this post. The two approaches to safeguard minority rights are Stock Structure (and related ballot agreements) and Work Contracts.