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
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
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
David C. Roberts and Norris McLaughlin & Marcus, P.A., cordially invite you to a complimentary breakfast seminar that will explain your rights as a shareholder. You may feel your business partner is defrauding you by taking too much money and using the company as a personal piggy bank. Or, you may simply feel kept in the dark, marginalized, and left out in the cold. » Read More
Many times, two 50% owners possess different areas of expertise and separate spheres of influence. For example, it is not uncommon for one business partner to be in charge of sales, with the other in charge of finances. Because of this, one person often has more contacts than the other. Presumably, but not necessarily, the shareholder in charge of sales will have more customer contacts than the one who runs the front office.» 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