In a closely held California corporation, majority shareholders owe fiduciary duties to minority shareholders. The California Supreme Court established this principle in Jones v. H.F. Ahmanson & Co. (1969) 1 Cal.3d 93, holding that majority shareholders must exercise their control with inherent fairness toward the minority — they cannot use their controlling position to benefit themselves at the minority's expense.

This duty prohibits structuring transactions to funnel value away from the minority — through excessive compensation to majority-owner employees, below-market asset sales to related parties, or decisions that dilute the minority's stake without business justification.

California Corporations Code section 1600 gives shareholders the right to inspect the corporation's accounting books, records, and minutes upon written demand stating the purpose. A shareholder holding at least five percent of outstanding shares may also inspect and copy the record of shareholders. If the corporation refuses, the shareholder may petition the superior court for an order compelling inspection.

California Corporations Code section 1800 allows a shareholder to petition for involuntary dissolution when those in control have engaged in conduct that is "illegal, oppressive, or fraudulent." Oppressive conduct includes eliminating the minority's role in management without justification, withholding dividends while compensating majority-owner employees excessively, and structuring decisions to squeeze out the minority at an artificially low valuation.

Example: Two founders hold 70% and 30% of a Saratoga software company. After a disagreement, the 70% owner terminates the 30% owner's employment, stops paying dividends, and begins drawing a salary triple what comparable executives receive. The 30% owner has no exit and no income. This pattern is the paradigmatic fact pattern for a shareholder oppression claim in California.

When a minority shareholder petitions for dissolution under Corporations Code section 1800, California law allows the majority to avoid dissolution by electing to purchase the minority's shares at fair value. The court supervises this process and may appoint an appraiser if the parties cannot agree on valuation. California courts have awarded minority shareholders the full pro-rata value without applying a minority discount, particularly where the majority's conduct was oppressive.

When the corporation itself has been harmed by the wrongdoing of directors or majority shareholders, a minority shareholder may bring a derivative lawsuit on the corporation's behalf. Under Corporations Code section 800, the shareholder must have been a shareholder at the time of the wrongdoing and must make a demand on the board before filing, unless demand would be futile. Successful derivative claims can recover the value diverted from the corporation and, in appropriate cases, attorney's fees.