Wilkes v. Springside Nursing Home addresses fiduciary duties in a close corporation. What do majority shareholders owe to minority?

• A. A fiduciary duty of utmost good faith and loyalty; they may take action if they have a legitimate business purpose; minority can show alternatives.
• B. No fiduciary duties exist.
• C. They owe the same duties as officers of a non-close corporation.
• D. They must always share profits equally.

Answer: (A)

In a close corporation, controlling shareholders owe heightened fiduciary duties to the minority. They must act with utmost good faith and loyalty toward minority shareholders, avoiding self-dealing or actions that unfairly exploit their control. They may pursue legitimate business goals and make decisions that benefit the company, but they must also show consideration for the minority’s interests; this includes demonstrating there was a legitimate business purpose and that there were no viable alternatives that would have protected minority shareholders. This framing captures why the option describing a duty of loyalty and good faith, with room for legitimate business purposes and an alternatives safeguard, best fits Wilkes v. Springside Nursing Home. It also aligns with the idea that these duties are heightened in close corporations and are not simply the same as officers’ duties in a non-close corporation, nor a requirement to share profits equally.