The purpose of this blog entry is to provide a brief list of the squeeze-out techniques often used by majority shareholders in their effort to oppress minority shareholders. The list which follows is merely illustrates of some of the techniques I often encounter with regard to my representation of oppressed minority shareholders. Of course, this list is not exclusive.
Generally, “oppression has been defined as frustrating a shareholder’s reasonable expectations.” Brenner v. Berkowitz, 134 N.J. 488, 506 (1993) (citing, 2 O’Neil’s Close Corporations § 9.29 at 132 (Callaghan & Co., 3rd ed. 1988)). The following situations could constitute actionable unlawful “oppression” where the majority:
- has cut off the flow of income to the minority owner by refusing to declare dividends;
- terminated the employment of the minority or their family members;
- removed the minority from the board of directors;
- decided to award themselves (or their family members) exorbitant salaries and/or bonuses;
- diverted corporate assets to other corporations which are owned by the majority and not the minority;
- siphoned off corporate assets by entering into leases or loans with terms favorable to the majority while at the same time detrimental to the minority;
- refused to enforce contracts that are beneficial to the corporation because the enforcement of those contracts would be personally detrimental to the majority;
- withheld company information;
- embezzled company assets; and/or
- acted fraudulently towards the corporation, which, in turn affects the minority shareholder.
In blog articles to follow, I will go into greater detail as to the majority’s use of the afore-described squeeze-out techniques along with how a minority shareholder may employ the law to fight back.