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
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
I’ve previously written about the fact that, in many cases, a minority shareholder who knows with absolute certainty that he or she is an owner still may have such status challenged. I have heard some crazy – and some not so crazy – arguments as to why someone is not actually an owner. In small, closely held businesses, it is not uncommon for the company to keep abysmal records. » Read More
Company founders often wrestle with how to bring their children into the company fold. A shareholder may want his children to become owners, but not all owners should necessarily work in the business. If a first generation owner has more than one child who wants to work in the family business, there are often challenges to overcome. When there are two or more founders, though, and children of multiple different families want to become employees, the challenges are even greater. » Read More
Shareholder dispute litigation, especially among family members, is often about much more than the controversy actually at stake in the litigation. There are often underlying psychological underpinnings for what has led to the lawsuit.
For example, in a recent case, the majority shareholder suddenly cut off his brother, a one-third owner, from all financial information. Despite repeated demands, the majority shareholder simply would not share anything related to the business. » Read More
I have written on this blog several times that termination of employment potentially constitutes shareholder oppression. As written previously, if a court finds that the termination frustrates a shareholder’s reasonably held expectations, then the termination may be deemed oppression, and the oppressed minority shareholder may be afforded the remedy of a buyout. However, what about the flipside of that scenario? It is also often the case that an employee will quit, and the majority owners will assume that they can then buy out the shareholder, even if the shareholders’ agreement does not specifically provide for this situation. » Read More