One of the most common reasons for a minority shareholder to file “business divorce litigation” is because that minority owner feels left out, pushed out, squeezed out – simply not part of the process in any significant way. Quite often, the minority owner is pushed out for a reason that is not entirely unjustified. But just as often, these feelings are the result of a misunderstanding that has spiraled out of control.» Read More
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
When minority shareholders in New Jersey (including LLC members) are being treated unfairly or oppressively, the New Jersey minority shareholder oppression statute provides significant rights that are written about quite frequently on this site. The upside of a successful oppression suit is often a buyout at market value. However, what if the minority shareholder loses the case?
The consequences of losing a shareholder oppression suit can be enormous, as most shareholders get only one true “bite at the apple.” In other words, if you already felt you were being treated unfairly, but the court did not grant you the relief that you wanted and left you as a minority shareholder, how likely would you be to ever file a second shareholder oppression lawsuit? » Read More
A common theme among minority shareholders seeking legal representation is termination of employment. Readers of this blog may be aware that termination can often constitute minority shareholder oppression, warranting a remedy such as a court-ordered buyout. But, unfortunately, not all terminations are equal, as not all terminations constitute oppression.
The key to whether termination of employment amounts to minority shareholder oppression is what the court calls the “reasonable expectations” of the employee/shareholder. » 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
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 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
An injunction is when a court orders someone to do something, or not to do something. These can be very difficult to obtain – in some circumstances – and are often not granted when money damages at the end of a lawsuit can make the aggrieved party whole. In shareholder dispute litigation, injunctions are often a critical tool. A court can order the majority shareholder not to take certain actions that would be hard to unwind at the end of the case. » Read More
Often employees sign non-compete and non-solicitation agreements that spell out what an employee can and cannot do after employment is terminated. Usually, if an employee never signed such an agreement, he or she is free to compete post-employment, provided confidential information is not involved. However, when the employee is also a shareholder, as is often the case in closely held corporations, there is a twist.» Read More