- A strategy for providing some minority shareholder control is to alter the voting requirements for specific decisions to require supermajorities — either on the board of directors or at the shareholder level.
- Supermajority votes have the practical effect of giving minority shareholders a veto right over certain matters. Common examples would include firing officers or shareholders, declaration of dividends, increasing salaries, incurring indebtedness (or incurring indebtedness over a certain amount), etc.
Usually, majority vote is required to approve of specified matters, but the same result is obtainable by requiring a supermajority that would require minority assent — for example, requiring 80% approval of matters when the minority interest is 25%. NJ law permits increasing the percentage needed to approve a measure to any desired number. Where supermajorities (rather than unanimity) are used, the quorum requirements also need to be adjusted to ensure minority participation in the vote.
A minority shareholder veto reduces the danger of shareholder oppression; however, it can create the problem of deadlocks that can cripple a corporation’s ability to function.
To discuss your NJ shareholder matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Shareholder Attorney