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Minority Shareholders Don’t Always Have a Right to Information


There appears to be an uptick in the filing of meritless corporate shareholder and LLC member oppression claims in New Jersey.  Not everything that majority shareholders do that upsets a minority owner is worth spending legal fees to pursue.

When the only allegations one can make are a failure to keep an absentee shareholder fully informed of all business transactions, and a failure to obtain that minority shareholder’s consent to such transactions, that alone is rarely a recipe for successful litigation.  Failing to provide the documents that a company is required to provide to you under New Jersey law is very different from failing to give you every document that you want to see – especially if you want to see everything and believe no transactions may be undertaken without your consent.

It may be the case that, in certain circumstances, you have legal rights resulting from the failure to provide adequate information.  But an attorney who does not routinely handle such business divorce actions may not have enough experience to know the difference between when the lack of information has crossed the line into shareholder oppression.

It is bad enough to have to spend tens of thousands of dollars to litigate in order to receive a buyout of your shares.  But a far worse result would be spending huge legal fees, only to be told by the  Court that you have not shown an entitlement to relief under New Jersey law, so the money just spent on legal fees was just wasted.

If you are a minority shareholder and are being frozen out from basic information, make sure the attorney advising you has experience with business divorce litigation.

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