What are Common Squeeze-Out Techniques?

A “squeeze-out” is an action taken by majority or controlling shareholders in an attempt to reduce or eliminate a minority shareholder’s interest in a closely-held corporation.

Common squeeze-out techniques include:

• Refusal to declare dividends
• Refusal to distribute earnings as bonuses or retirement benefits
• Siphoning off earning through exorbitant salaries and bonuses
• Termination of employment (the functional equivalent to a denial of dividends or any return on investment)
• Removal as directors or officers (or effectively depriving minority shareholders of any active voice or meaningful role in the management and operation of the corporation)
• Deliberate withholding of information or manipulation of company books and records
• Usurpation of buisness opportunities and misappropriation of corporate assets

Squeeze-out techniques are used by majority or controlling shareholders to “lock-in” a minority shareholder for two reasons: (1) to force a sale of a minority interest at less than a fair price and (2) to “freeze out” the minority of a fair return on investment.