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
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
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
Many times a law is enacted, but a judge or appellate court makes a decision that casts the interpretation of that law into chaos. (Of course, none of the judges I regularly appear before would ever do this.) Almost one year ago, the New Jersey LLC Act was amended to give LLC members the minority owner oppression remedies historically applied to shareholders of a corporation.» Read More
When majority shareholders want to force a minority owner out of the company, there are a variety of means for doing so. One of the most popular methods is the unnecessary capital call.
One recent case involved a client who was a part owner of a corporation that seemed, on the surface, to be in need of money. In reality, the majority owner was “in need” of “getting rid” of the minority shareholder (my client) to solidify his control over the company.» Read More
Recently, a defendant testified in a deposition that I was conducting that there was no reason that he could not fire my client, who was a 28% minority shareholder in a New Jersey corporation. Since the defendant was the majority (51%) owner, he believed he could fire whomever he wanted.
Of course, he is right. He could fire whomever he wants. » Read More
In a shareholder oppression lawsuit, clients often think that if they have ever done something “wrong,” they have somehow lost their legal rights to complain about fraud or unfairness by the majority. While a skeleton in one’s closet can be problematic, it is rarely bad enough to cause a minority shareholder to lose the ability to sue his business partners who are treating him improperly.» Read More
I have posted several times (most recently in January) about termination of an employee/shareholder constituting oppression, because this type of misconduct by majority shareholders happens all the time. If one had a reasonable expectation of continued, even indefinite, employment, the act of termination itself could constitute shareholder oppression under New Jersey law, possibly giving the terminated shareholder the right to be paid for his or her shares. » Read More
I previously discussed the fact that, when a shareholder can successfully show that he or she had a reasonable expectation of continued future employment, termination can constitute what is called “shareholder oppression” and may entitle a shareholder to the remedy of a forced buy out of his or her shares. » Read More
Majority shareholders often will not be so bold as to fire a fellow shareholder from his job during a business partner dispute, and they cannot simply take away a minority shareholder’s stock interest. Instead, the Freeze-Out, or Squeeze-Out, can become the weapon of choice.
A Freeze-Out can occur in many different forms. A minority shareholder who used to be involved in crucial decisions suddenly finds that his opinion is no longer sought after. » Read More