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Minority Investor Protections As Default Norms: Using Price To Illuminate The Deal In Close Corporations, Robert C. Illig

American University Law Review

This Article argues that legal protections for minority investors in close corporations should be interpreted as default rules. Currently, such protections are mandatory and thus impose on investors a uniform norm of conduct that restricts their freedom to bargain. Courts and scholars advocating such protections have so far been unwilling to permit their waiver primarily because of the difficulty of distinguishing between a knowledgeable waiver and an ignorant omission.

A price-based approach solves that puzzle, however, by using the consideration paid by investors to illuminate their intentions. By permitting waiver only where there is clear evidence that the minority received …