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
When two people start a company, neither wants to give control to the other, so ownership is usually split 50/50. This sounds like a great idea at the outset, when everyone is on the same page, and there is usually no other practical way to proceed. But when you and your partner start having different ideas about the direction of the company, and significant trouble ensues, the law of New Jersey may provide the practical remedy that you are looking for.» Read More
While most of my posts on this blog look at shareholder dispute issues from the perspective of the oppressed minority shareholder, I have represented numerous companies defending shareholder litigation, as well. One corporate client recently wanted to know how to avoid such litigation if the shareholder agreement has been long-ago agreed to, and there is little that can be done to get near-warring parties to agree to anything in writing. » Read More
Minority shareholders often do not work at the company, and are not involved in management, making them, for lack of a better word, “passive investors.” While no broad rule can ever be applied to everyone, it is these types of minority shareholders who are the most vulnerable to abuse by the majority shareholders.
The easiest way for a passive minority shareholder to be abused is for the majority shareholders to keep increasing their salaries and bonuses to the point that they are significantly above market rates. » Read More
While minority shareholders have considerable rights under New Jersey law, including the right to be free from oppression, this does not mean that majority shareholders may be bullied by minority shareholders who consistently oversteps their bounds.
Business owners may recognize the minority shareholder who (1) knows little about the business, yet insists he knows more than those who actually do the work and have the expertise; (2) attempts to dictate the way the business is run; or (3) demands to see every scrap of paper generated by the business operation.» Read More