You likely came across this article if you Googled the term “shareholder dispute.” However, it is just as likely that you Googled the term “business divorce.” One business owner suing the other(s) to be bought out, or some other escape, is often rightly referred to as business divorce because it is analogous to a divorce among spouses in obvious ways. This posting is about the less obvious ways the two types of legal actions are similar.» Read More
Many shareholders contemplating getting a “business divorce” have put up with an intolerable situation for years, because they fear that filing a shareholder oppression lawsuit will somehow make matters even worse. They might be partly correct in the short term. But the long-term gains often outweigh temporary negatives.
For example, one client had been marginalized and sidelined for years from all important company decisions and all company financial information. » Read More
In closely-held businesses in New Jersey with multiple owners, it seems fairly obvious that the more co-owners you can recruit to your side in a business divorce litigation, the better. You don’t need a lawyer to tell you that. However, what is not so obvious is the possibility of recruiting co-owners to your side once the litigation has commenced.
Litigation – especially business divorce litigation – can be quite divisive. » 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
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
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
The New Jersey Supreme Court has decided a new case addressing what it takes to expel a member from an LLC in New Jersey.
The applicable statute in New Jersey (42:2C-46(e)) has three subsections dealing with expelling a member, two of which are fairly clear. One section permits the expulsion of a member by the Court when he or she engages in activity that may hurt the company in a material way, or is about to engage in such activity; and another permits expulsion when a member willfully and persistently breaches the Operating Agreement or the member’s fiduciary duties. » Read More
To negotiate – or to sue? That is the question when the decision to sue might potentially hurt the company.
A minority shareholder (or LLC member) in New Jersey is often faced with a difficult choice. Confronted with mounting evidence of shareholder oppression and improper conduct by the majority, minority shareholders may have the right to sue and attempt to force a buyout of their shares. » Read More