Statutory protections may be found in the minority oppression statutes, such as in New Jersey’s Minority Oppression Statute, N.J.S.A. 14A:12-7(c). New Jersey statutory law also provides rules, rights and obligations relating to: notice to shareholders, meetings and inspection of the company’s books and records. Sometimes, the majority’s actions run afoul of other statutory laws such as the New Jersey Law Against Discrimination. For example, in one of my recent cases, a majority shareholder asserted retaliation claims against a minority shareholder after the majority changed her responsibilities after the minority brought serious concerns about sexual harassment of a company employee.
The common law also offers minority shareholders protections from oppression. An oppressed minority shareholder could assert a breach of fiduciary duty claim, if the majority puts their interests over the interests of the company or the minority shareholder. A claim based upon common law fraud may be used in certain circumstances where the majority knowingly (with scienter) makes false or misleading statements which are detrimentally relied upon by the minority shareholder. Sometimes, a minority shareholder may successfully assert breach of contract claims against the majority. If the majority is stealing corporate assets the minority may successfully assert conversion or misappropriation of company asset claims.
Finally, courts possess equitable powers. Courts may use their inherit equitable powers to remedy oppressive situations. For example, in one of my recent cases, the Judge appointed a provisional director to serve as a tie-breaker when two fifty-percent (50%) shareholders could not reach agreement. Moreover, Courts may enter a Temporary Restraining Order enjoining a party from engaging in behavior it deems to be detrimental to the corporation, a shareholder, or both.
If you believe you are an oppressed minority shareholder and would like to discuss your situation in more detail, please contact me in my Lawrenceville, New Jersey office.