Oppressed Shareholders

What is an Oppressed Shareholder?

An oppressed shareholder is someone who owns stock in a closely held company who is treated unfairly by the majority or controlling shareholders. Both New Jersey and New York law protect minority shareholders from the controlling shareholders taking advantage of them. If you own stock in a closely held corporation and have been abused, treated unfairly or “frozen out” by the majority shareholders, you might have a legal claim as an oppressed shareholder.

What Type of Treatment is Considered Oppressive?

In both New Jersey and New York, “oppression” occurs when the controlling shareholders are not treating you the way someone would reasonably expect to be treated as a minority stockholder in a closely held corporation. For example, it could include being denied your fair share of the company’s profits or dividends, excluded from shareholder meetings, kept out of important business decisions, denied access to the company’s books and records or fired or removed from your position as an employee, officer or director of the business.

Legal Remedies For Oppressed Shareholders

Depending on the circumstances, if you have been exploited as a shareholder of a privately owned business a court could force the majority shareholder (or shareholders) to buy your stock from you at its fair value. This is intended to allow you to recover the value of your investment while allowing the controlling shareholders to continue running their business. In rare circumstances, a court can instead order the dissolution of a company as a remedy so you can receive compensation for the value of your stock.

Shareholder’s Expectation of Continued Employment

Often, one or more of the owners of a closely held corporation are also employees of the company and make their living from that job. Under the New Jersey Oppressed Shareholder Statute, shareholders of closely held corporations can have a reasonable expectation of continued employment if long-term employment was expected as part of their ownership of the stock. For example, this is frequently true for family owned companies or for individuals who became owners of a closely held corporation as a result of a merger with a business they founded. When a minority shareholder of a closely held business who has a reasonable expectation of continued employment is fired, demoted or forced to resign by the majority shareholders he or she might be entitled to damages for his or her past and future lost salary, bonuses, health insurance and other employment benefits.

Rabner Allcorn Baumgart & Ben-Asher Can Help

The attorneys at Rabner Allcorn Baumgart & Ben-Asher are experienced at helping minority shareholders who have been oppressed by unreasonable behavior by the controlling shareholders. We can explain the law to you, discuss your options, and fight to enforce your legal rights. We invite you to contact us online or call us in New Jersey at (973) 744-4000 to schedule an appointment with one of our employment lawyers.

For more information about your rights please read our blog article: The New Jersey Oppressed Shareholder Statute Protects the Ownership Interests of Shareholders in Closely Held Corporations.