New York law protects minority shareholders from oppressive conduct. However, New York’s dissolution statute does not define what constitutes minority oppression.
New York Courts have applied the reasonable expectation of the shareholder test when determining whether or not the minority shareholder has been oppressed. Under that test, the Court must determine what are reasonable expectations of the shareholder. Those reasonable expectations are typically developed on a case-by-case basis. In a previous post I set forth circumstances and situations which could constitute minority oppression. Again, courts have found that the majority oppressed the minority when they:
- reduced the minority’s compensation without reason;
- terminated the minority’s employment without cause;
- denied the minority owners access to the company’s books and records;
- terminated the employment of the minority shareholders’ family members without cause;
- refused to declare dividends;
- started competing businesses; or
- stole from the company.
The above list is illustrative (it is far from exhaustive). That is, because New York applies the reasonable expectations of the shareholder test in determining whether or not a minority shareholder has been oppressed.
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.