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:

  1. has cut off the flow of income to the minority owner by refusing to declare dividends;
  2. terminated the employment of the minority or their family members;
  3. removed the minority from the board of directors;
  4. decided to award themselves (or their family members) exorbitant salaries and/or bonuses;
  5. diverted corporate assets to other corporations which are owned by the majority and not the minority;
  6. 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;
  7. refused to enforce contracts that are beneficial to the corporation because the enforcement of those contracts would be personally detrimental to the majority;
  8. withheld company information;
  9. embezzled company assets; and/or
  10. 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.