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
More and more shareholder dispute litigations are settling earlier than ever before, which is obviously a good thing for anyone who does not want to pay a fortune in legal fees (i.e., everyone). The reason is simple – in all but a handful of business divorce cases, it is obvious to everyone involved that the oppressed minority shareholder will wind up on the receiving end of a buyout. » 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
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
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
When you find yourself involved in a minority shareholder dispute, whether you are the Company (majority), or the minority owners, the role of the company accountant is often somewhat unclear. The more experience your company accountant has with dealing with differing shareholder factions, the better.
For example, New Jersey law spells out precisely what financial documents a minority shareholder is absolutely entitled to see, and the list is not terribly long. » Read More
As discussed many times on this blog, shareholder dispute litigation can be extremely costly and terribly disruptive to company operations. From the company’s point of view, it should be avoided if at all possible. Once an oppressed minority shareholder complaint is filed, or is about to be filed, it is often too late to avoid. This post is more focused on what company management can do to make sure the circumstances that could lead to such a lawsuit do not infect your company.» Read More
Many times, minority shareholders pursuing their shareholder oppression rights, as well as majority shareholders being sued for minority shareholder oppression, feel the important thing to look for in an attorney is experience dealing with the particular industry that the company occupies. For example, the President of a chemical company retained counsel to represent the company on all corporate matters due to his long history representing chemical companies, since he clearly understood issues relating to that field, particularly the environmental regulations that company routinely encountered. » Read More
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