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
Most of the time, when I ask a new client who is in control of the company, the question is not difficult to answer. Even after an election takes place, the results are usually not difficult to discern. After all, an LLC or corporation usually does not have so many members or shareholders that the votes are difficult to count. But what happens when the losing side of a vote simply does not recognize the victors, and refuses to cede control?» Read More
As many of you have read here before, the New Jersey Limited Liability Company Act now includes recovery for minority member oppression. Those remedies cannot be waived, as a matter of law. However, the parties to an LLC’s operating agreement (or a corporation’s shareholder agreement) can agree to an alternate dispute resolution (“ADR”) mechanism in advance, impacting the forum in which these issues will be decided.» Read More
I have written many times over the years about the differences between a corporation and an LLC when it comes to minority owner rights in New Jersey. On many occasions, I have written about the fact that shareholder rights are much more expansive in a corporation, and much more restrictive in an LLC. That all changes of March 1, 2014.
On that date, the existing LLC statute is being repealed, and the oppressed minority shareholder statute is effectively being incorporated into the LLC statute.» Read More