Some clients come in for a consultation with no desire to file an oppressed minority shareholder action. Instead, the goal is to have an attorney draft the papers necessary to accept an offer made by the other side to purchase his or her shares, avoiding just such a court battle. Corporate attorneys who do not handle shareholder oppression cases may assume the purchase price is fair, or at least not question it closely, and simply “paper” the transaction. » Read More
I have written extensively on this site about ways to resolve shareholder disputes before they turn into expensive shareholder dispute litigation. The cost of such litigation, as anyone who has experienced one knows, can be quite significant. However, sometimes there is very little choice, and filing an oppressed minority shareholder suit is preferable to taking no action at all.
In one recent case, a client came in who had been abused by the majority shareholders for years. » Read More
Most of the time, when I ask a new client who is in control of the company, the question is not difficult to answer. Even after an election takes place, the results are usually not difficult to discern. After all, an LLC or corporation usually does not have so many members or shareholders that the votes are difficult to count. But what happens when the losing side of a vote simply does not recognize the victors, and refuses to cede control?» Read More
I’ve previously written about the fact that, in many cases, a minority shareholder who knows with absolute certainty that he or she is an owner still may have such status challenged. I have heard some crazy – and some not so crazy – arguments as to why someone is not actually an owner. In small, closely held businesses, it is not uncommon for the company to keep abysmal records. » Read More
Company founders often wrestle with how to bring their children into the company fold. A shareholder may want his children to become owners, but not all owners should necessarily work in the business. If a first generation owner has more than one child who wants to work in the family business, there are often challenges to overcome. When there are two or more founders, though, and children of multiple different families want to become employees, the challenges are even greater. » Read More
Shareholder dispute litigation, especially among family members, is often about much more than the controversy actually at stake in the litigation. There are often underlying psychological underpinnings for what has led to the lawsuit.
For example, in a recent case, the majority shareholder suddenly cut off his brother, a one-third owner, from all financial information. Despite repeated demands, the majority shareholder simply would not share anything related to the business. » Read More
I have written on this blog several times that termination of employment potentially constitutes shareholder oppression. As written previously, if a court finds that the termination frustrates a shareholder’s reasonably held expectations, then the termination may be deemed oppression, and the oppressed minority shareholder may be afforded the remedy of a buyout. However, what about the flipside of that scenario? It is also often the case that an employee will quit, and the majority owners will assume that they can then buy out the shareholder, even if the shareholders’ agreement does not specifically provide for this situation. » Read More
Many new clients come to me after they have already negotiated their separation from the company – usually shareholders who have agreed to be bought out – and now want me to just “write it up.” Kudos to these clients for at least not attempting to draft the entire agreement themselves. The downside is that these clients often have no idea the harm they may have done to themselves already by negotiating without assistance.» Read More
In the last year or so, I have seen several business owners who are not very happy that New Jersey LLC members now have the same protection from minority oppression that is enjoyed by minority shareholders of corporations. To “protect” against such lawsuits, apparently several attorneys around the state are advising clients to add to Operating Agreements a clause that waives this protection.» Read More
When you started the company, both shareholders holding a fifty percent interest seemed like a good idea at the time. That way, everything was equal. Neither one of you answered to the other. Neither could be “bossed around” by your business partner. But, if you are reading this article after a Google search, you undoubtedly have learned, probably the hard way, of the potential shortcomings of this arrangement.» Read More