New York law provides protections for oppressed minority shareholders. These protections are contained in under New York’s minority oppression statute, it’s interpretation by the Courts along with New York’s recognition of the fiduciary duties majority shareholders owe the minority.
"Although the term ‘oppressive actions’ is not statutorily defined, the Court of Appeals has held that ‘oppression should be deemed to arise when the majority conduct substantially defeats expectations that, objectively viewed, were both reasonable under the circumstances and were central to the petitioner’s decision to join the venture.’" In re Dissolution of Upstate Medical Assoc. P. C., 739 N.Y.S.2d at 767 (citing Matter of Kemp & Beatley, Inc., 64 N.Y.2d 63, 73 [N.Y.1984] [‘A shareholder who reasonably expected that ownership in the corporation would entitle him or her to … a share of corporate earnings, …, or some other form of security, would be oppressed in a very real sense when others in the corporation seek to defeat those expectations and there exists no effective means of salvaging the investment.’] ).
‘The relationship between majority and minority shareholders in New York is a fiduciary one. Brunetti v. Musallam, 11 A.D.3d 280 [N.Y.App. Div., 1st Dept.2004] Pursuant to that fiduciary duty, a majority shareholders in a closely held corporation may not to engage in oppressive actions toward minority shareholders. McCagg v. Schulte Roth & Zabel LLP, No. 601566/04, 2008 WL 4065920, at *8 (N.Y. Sup.Ct., New York County 2008); see also In re Dissolution of Upstate Medical Assoc. P.C., 739 N.Y.S.2d 766, 767 (N.Y.App.Div., 3rd Dept.2002).
In addition, New York Court have consistently held that corporate directors and controlling shareholders of close corporations owe minority shareholders the extreme measure of candor, unselfishness and good faith.’ Harger v. Price, 204 F.Supp.2d 699, 707 (S.D.N.Y.2002) (citing Kavanaugh v. Kavanaugh, 226 N.Y. 185, 193  ).
Thus, if you are being oppressed by the majority in a closely held, New York Corporation, you may be entitled to relief.
Scott Unger is a Shareholder in Stark & Stark’s Lawrenceville, New Jersey office concentrating in Shareholder & Partner Dispute Litigation. For questions, or additional information, please contact Mr. Unger.