Norris McLaughlin & Marcus, P.A.

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LLC

Apr 28, 2017

Trust But Verify Regarding Financial Information

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

Feb 16, 2017

How An Employee/Shareholder Can Protect Oneself Against Oppression

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

Sep 13, 2016

New Case Addresses LLC Member Expulsion in New Jersey

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

Mar 16, 2016

Epic Battle for Control Ends in Victory

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

Apr 14, 2014

Pros & Cons of Alternative Dispute Resolution in Shareholder Dispute Litigation

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

Jan 17, 2014

Get out of That New Jersey LLC before the Law Changes?

In my last post, I wrote about the fact that your right to simply withdraw from a New Jersey LLC and be paid fair market value for your shares – provided the Operating Agreement does not prohibit this – is being eliminated on March 1, 2014.  Many readers of that post have contacted me, hoping there was a way to extend that deadline. » Read More

Nov 20, 2013

Termination of LLC Member Employee Could Soon Be Considered “Oppression”

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

Oct 11, 2013

New Jersey LLC Minority Members Can Look Forward to More Protection

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

Mar 27, 2012

New Case Reaffirms the Difference Between Corporations and LLC’s When It Comes to Rights of Minority Owners

I have written extensively about the difference between the law in New Jersey protecting a minority shareholder in a corporation, and the law protecting a minority member in a limited liability company (LLC).  Most lawyers practicing extensively in this area of law have long argued, and believed, that the statute protecting minority shareholders in a corporation from what is considered “shareholder oppression” does not apply to LLC’s (much as we may want it to). » Read More

Nov 29, 2011

You Can Pay a Lawyer a Little Now, or a Lot Later

When you started your company all those years ago, you were certain you didn’t need a Shareholders’ Agreement (or, in the case of an LLC, an Operating Agreement). An attorney would have charged you more than you wanted to pay at the time to draft one (as they usually do), and after all, you trusted your business partner (back then). If an issue between you ever arose, you were confident in your ability to work it out quickly and easily.» Read More

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