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
Previously on this website, I wrote about how a recession can help an unscrupulous business partner hide his fraud (Nov. 2008). For example, I explained that “tough economic times” can be used as an excuse to stop paying dividends or providing other financial benefits to minority shareholders. However, it can be equally true that a stronger economy, like we may be experiencing at the moment, can also be used to mask fraud.» Read More
Shareholder disputes often arise because of a lack of information being disclosed by the majority to the minority shareholders. In New Jersey, there are limitations as to what financial documents must be shared with minority shareholders. However, most of the time business owners believe that their business partners should share more information than the bare minimum dictated by law.
A common tactic employed by majority shareholders who do not want to disclose any more financial information than required, yet want to stave off a minority shareholder lawsuit, is to provide a “slow drip” of information. » Read More