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
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
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
I have written extensively on this site about ways to resolve shareholder disputes before they turn into expensive shareholder dispute litigation. The cost of such litigation, as anyone who has experienced one knows, can be quite significant. However, sometimes there is very little choice, and filing an oppressed minority shareholder suit is preferable to taking no action at all.
In one recent case, a client came in who had been abused by the majority shareholders for years. » 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
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