When a minority shareholder feels as though their corporation is not operating in a manner that they are satisfied with, they often seek to be bought out. When the majority shareholder refuses to buy them out and operates the business in a manner that personally benefits themselves at the expense of the minority shareholders, this is a form of Minority Shareholder Oppression, a violation of New Jersey law. The NJ Supreme Court has said that when dealing with the Oppressed Minority Shareholder Statute, a 50% shareholder can be considered a “minority” shareholder, meaning they are entitled to bring a case to court alleging a violation of the statute.
When a minority shareholder brings such an action, the NJ Courts will need to determine how much your shares are worth. In doing so, the courts will apply a “minority” and “marketability” discount to your shares in determining how much they are worth. In addition, New Jersey law provides that you will be given the “Fair Value” of your shares, determined by a valuation expert’s testimony. This is different from the “Fair Market Value”, the amount you might think your shares are worth on the open market.
One key factor that will affect the value of your shares is the valuation date. Under NJ law, this date is the date of the filing of your lawsuit or any earlier/later date the court may deem equitable. The court has complete discretion to decide the date and determine the value of your shares. As one can imagine, this value can fluctuate depending on when your lawsuit is filed and when the court decides to place a value on your shares.
Contact me personally to discuss your NJ Shareholder matter. I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns. You can reach me toll-free at (855) 376-5291 or email me at fniemann@hnlawfirm.com/.
By Fredrick P. Niemann, Esq., a NJ Shareholders Attorney