As I have said many times in this blog, when minority shareholder oppression occurs, the most likely remedy is a buyout. In other words, courts in New Jersey have the power to compel the majority shareholder to pay “fair value” to an oppressed minority shareholder so the victim of wrongdoing is not forced to remain captive as a shareholder in a company that is treating him improperly. » Read More
Minority owners of closely-held corporations (in New Jersey) often put themselves in a position where they are cut off from access to the company’s books and records. When that happens, several things can occur, and few of them are good.
For example, majority shareholders who have unfettered access to the company’s finances often abuse their power by granting themselves impermissible benefits that are not related to their employment by the company, and are not proportionately shared with the minority shareholders. » Read More
In my last post, I addressed the fact that, just because a minority shareholder has gone along with certain practices in the past, his acquiescence will not necessarily be fatal to a shareholder oppression claim. However, that does not mean you should simply go along with something that you fundamentally disagree with, and assume it will have no consequences to you in the future.» Read More
Many clients ask at the start of a business divorce lawsuit, “Is it fatal to a shareholder oppression claim if I was doing some of the same things that the majority owners are doing that I am now complaining about?” As often happens when it comes to a nuanced legal analysis under New Jersey law, the answer is, “It depends.”
For example, suppose you are a one-third shareholder, and the other one-third shareholders collectively run and control the business operations, especially the finances. » Read More
When minority shareholders in New Jersey (including LLC members) are being treated unfairly or oppressively, the New Jersey minority shareholder oppression statute provides significant rights that are written about quite frequently on this site. The upside of a successful oppression suit is often a buyout at market value. However, what if the minority shareholder loses the case?
The consequences of losing a shareholder oppression suit can be enormous, as most shareholders get only one true “bite at the apple.” In other words, if you already felt you were being treated unfairly, but the court did not grant you the relief that you wanted and left you as a minority shareholder, how likely would you be to ever file a second shareholder oppression lawsuit? » Read More
Because termination of one’s employment does not necessarily equate to shareholder oppression under New Jersey law, as seen in my last post, it is often a good idea to take proactive measures to inoculate yourself against a termination that leaves you in the company as a shareholder, but not as an employee. This is especially critical if you have invested your own money, since an adverse result in a shareholder oppression litigation would leave your shares held hostage by the majority shareholders, essentially allowing the majority to use your capital in a manner over which you have little or no control.» Read More
A common theme among minority shareholders seeking legal representation is termination of employment. Readers of this blog may be aware that termination can often constitute minority shareholder oppression, warranting a remedy such as a court-ordered buyout. But, unfortunately, not all terminations are equal, as not all terminations constitute oppression.
The key to whether termination of employment amounts to minority shareholder oppression is what the court calls the “reasonable expectations” of the employee/shareholder. » Read More
I have noted many times on this blog that emails often prove shareholder oppression cases. It can be fairly easy for majority shareholders who are careful, and seek legal advise beforehand, to mask their true intent when attempting to “freeze out” a minority shareholder. For example, when the majority shareholders set their salary and bonus at a rate the minority shareholder thinks is outrageously high (ensuring there is no money to distribute to shareholders at the end of the year), they could do so firmly believing that they are paying themselves a fair salary. » Read More
More and more shareholder dispute litigations are settling earlier than ever before, which is obviously a good thing for anyone who does not want to pay a fortune in legal fees (i.e., everyone). The reason is simple – in all but a handful of business divorce cases, it is obvious to everyone involved that the oppressed minority shareholder will wind up on the receiving end of a buyout. » Read More
Business owners who are having a dispute with their business partners (in New Jersey) should not read this blog and assume their only remedy is shareholder dispute litigation. Because of the cost – both in legal fees, and to your business – litigation should almost always be a last resort. But being prepared to file litigation often leads to other positive, productive results.» Read More