Norris McLaughlin & Marcus, P.A.

Blogs > Shareholder Disputes in New Jersey

Minority Shareholder Rights

Apr 28, 2017

Trust But Verify Regarding Financial Information

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

Mar 06, 2017

If You Lose A Minority Shareholder Oppression Lawsuit, Things Will Likely Get Worse – So Do It Right

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

Feb 13, 2017

Termination of Employment as Minority Shareholder Oppression

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

Oct 10, 2016

Court-Appointed “Tiebreakers” In a 50/50 Ownership Setting

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

Apr 20, 2016

Perils Of Negotiating Your Own Buyout

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

Nov 17, 2015

Shareholders Who Quit As Employees Might Not Have to Sell Their Shares if They Don’t Want To

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

Apr 30, 2015

Will A Court Reinstate A Terminated Shareholder-Employee?

An injunction is when a court orders someone to do something, or not to do something.  These can be very difficult to obtain – in some circumstances – and are often not granted when money damages at the end of a lawsuit can make the aggrieved party whole.  In shareholder dispute litigation, injunctions are often a critical tool.  A court can order the majority shareholder not to take certain actions that would be hard to unwind at the end of the case. » Read More

Dec 16, 2014

Can A Shareholder Compete With That Company After Employment Termination?

Often employees sign non-compete and non-solicitation agreements that spell out what an employee can and cannot do after employment is terminated. Usually, if an employee never signed such an agreement, he or she is free to compete post-employment, provided confidential information is not involved. However, when the employee is also a shareholder, as is often the case in closely held corporations, there is a twist.» Read More

Oct 14, 2014

Shareholder Oppression Remedies Are No Substitute for Control

The difference between owning 50% of your company and owning 51% is great.  But the difference between owning 50% and owning 49% could be catastrophic, despite the significant remedies available to oppressed minority shareholders in New Jersey.

After reading the other articles on this site, one comes away knowing that minority owners have significant rights in New Jersey (at least, that was my goal). » Read More

Jan 21, 2013

Should We Create a Corporation or an LLC? – From a Minority Owner’s Point of View

When starting a new company, your first decision is often whether to create a corporation, or an LLC.  Unfortunately, this election is frequently made without fully understanding how this decision impacts the rights of minority owners, either positively or negatively.  And without knowing what this impact means, it is impossible to realize why this issue is even important.

Taking this lack of information one step further, new business owners many times elect not to spend the money on having a qualified attorney draft a shareholders’ agreement (corporation) or operating agreement (LLC) once the company is actually formed.  » Read More

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