Articles Tagged with Shareholder Oppression

  • The Single Business Theory permits a court to treat related businesses as though they were one enterprise.

  • Courts apply the single business theory in rare cases to prevent injustice.


Pertuis v. Front Roe Rests., Inc., 2018 S.C. LEXIS 85 (2018)

Cases-of-Note-Corporations-300x166Statutes: S.C. Code Ann. § 33-18-420; S.C. Code Ann. § 33-15-105; S.C. Code Ann. § 33-18-200 to -210; S.C. Code Ann. § 33-18-220; S.C. Code Ann. § 33-18-230; N.C. Gen. Stat. § 55-14-31

An action by minority shareholder and manager of three restaurants, two organized in North and one in South Carolina, seeking valuation and purchase of interests as oppressed shareholder, and alleging that each of three closely held “s corporations” are a single business entity located in South Carolina. On appeal, the South Carolina Supreme Court recognizes the amalgamation theory under which multiple enterprises may be treated as single entity, but reverses because plaintiff was not assigned the burden of proof and because a South Carolina court has no authority to consider the internal affairs of a foreign corporation.  (Opinion here.) Continue reading

  • This seminal case by the New Jersey Supreme Court identifies minority oppression as the frustration of a shareholder’s reasonable expectations.

  • A court may order the compelled purchase of a shareholder’s interest as a remedy for shareholder oppression when it is the only practical alternative to judicial dissolution.

  • The minority shareholder seeking to force the purchase of shares must show a connection between the oppressive conduct of the majority and the minority’s interest as a shareholder.


Brenner v. Berkowitz, 134 NJ 488 (1993)

Cases-of-Note-Corporations-300x166

Statutes: N.J.S.A. 14A:12-7(1)(c)

Facts: Partners Resnick and Berkowitz formed successful company. Members of both families were employed in the business. When Resnick died, his shares were distributed to family members, including his daughter, the plaintiff Brenner. Relations between the two family members soured and Brenner’s son was fired. Brenner alleged illegal and oppressive conduct.

Trial court found that Brenner’s expectation was solely as director and investor, not in management of business affairs. Trial court found that some conduct of majority was illegal, but that it was not directed to plaintiff. The oppression was insufficient to trigger the statute. Continue reading

Minority Sharholder AttorneysIt was the stuff of which a good minority oppression claim is easily cooked up.  The party in control of the corporation had used the corporate bank accounts as his personal piggy bank while operating a competing business, paid himself inflated office rents and bankrolled an extra-marital affair with money taken from the business.

None of that, however, could carry the day in a lawsuit brought by the minority shareholders of a New Jersey corporation because they waited years to complain.

Minority Shareholder Oppression Alleged by Ousted Officer of Closely Held Corporation

Oppressed Minority Shareholder Litigation AttorneyAn oppressed minority shareholder was awarded approximately $750,000 in attorneys fees and expert expenses — some eight times the amount of the buyout — even though the majority had good reason to fire him from his position as the corporation’s CEO.

Fee Award Under Oppressed Shareholder Statute to Selling Shareholder

This case is a 14-year-old litigation involving a dispute between the family members of a family-owned business, and the outsider executive who was brought in to take over the management of the corporation.  The relationship quickly deteriorated amid allegations of misappropriation and sexual harassment in the workplace.

Businesswoman lifting heavy elephant

Holding a family business together gets more difficult as time passes, as this recent opinion
24824-staff_meetingfrom the Appellate Division demonstrates.  A rift between the family members still working for, and in control of H. Schultz & Sons, resulted in the minority members who stopped receiving dividends while the company was trying to remake itself from a retailer to a distributor.

No Shareholder Oppression in Exercise of Majority’s Business Judgment

The failure to pay dividends and a refusal to use the assets of the business to buy out the non-employee shareholders, however, in itself is the type of conduct that rises to shareholder oppression.

The group of minority shareholders who claimed that the corporation’s refusal to purchase their interests was shareholder oppression failed to establish a viable claim under New Jersey’s Oppressed Shareholders Act, says the Appellate Division

Affirming the trial court’s opinion in Goret v. H. Schultz & Sons, Inc., Docket No. A-4281-10T1 (App. Div. Sept. 10, 2013), the Appellate Division affirmed the holding that the refusal to repurchase minority interests no longer receiving dividends was an appropriate exercise of the business judgment rule.

 

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