Oppressed Minority Shareholders in Closely-Held New Corporations Have Rights

By Fredrick P. Niemann, Esq., a NJ Shareholders Attorney

Closely-held corporations have a small number of shareholders who comprise the ownership of the business. Minority shareholders are those who own less than 50% of the shares and therefore are unable to dictate business decisions by themselves, something a majority shareholder can do. However, despite not solely being able to indicate how they want the corporation to be run, minority shareholders in New Jersey do have rights, mainly the right not to be “oppressed” by majority shareholders.

An oppressed minority shareholder is one who does not get along with the majority shareholders of the corporation, yet upon request to be bought out by the other shareholders, is denied. This essentially leaves the oppressed minority shareholder stuck owning shares in a corporation that they do not have a voice in and do not wish to be in. New Jersey has a specific statute pertaining to oppressed minority shareholder. The statute states that corporations and majority shareholders may not act in a manner that is detrimental to the interests of the oppressed and minority shareholders. Oppression has been defined as an act directed at a minority shareholder personally that frustrates their reasonable expectations of the role they play in the management, operation, and other general affairs of the corporation.

Oppressed minority shareholders must show two things in order to obtain relief under New Jersey law. First, they must show misconduct on the part of the corporation and majority shareholders that amounts to oppression. The court will consider this on a case-by-case basis, since every situation is unique. Second, the minority shareholder must show the oppression is connected to harm suffered by them due to having their interests or reasonable expectations in the corporation hindered. Minority shareholder’s interests in the corporation not only include monetary interests, but non-monetary interests as well, such as having a voice in the operation of the business and direction of the corporation.

If you are a minority shareholder in a closely-held New Jersey corporation and think your interests are being oppressed, please contact Fredrick P. Niemann, Esq. today. Mr. Niemann is an experienced NJ Shareholders attorney and would be happy to assist you in your claim. He can be reached at 855-376-5291 or by email at fniemann@hnlawfirm.com/. He looks forward to hearing from you.

Posted in Corporations, Shareholder and tagged .