Shareholder Agreements Protect Minority Shareholders From Oppressive Conduct – Adopting the Supermajority Voting Requirement

HNWShareholder Rights Litigation

  • A strategy for providing some minority shareholder control is to alter the voting requirements for specific decisions to require supermajorities — either on the board of directors or at the shareholder level.
  • Supermajority votes have the practical effect of giving minority shareholders a veto right over certain matters. Common examples would include firing officers or shareholders, declaration of dividends, increasing salaries, incurring indebtedness (or incurring indebtedness over a certain amount), etc.

Usually, majority vote is required to approve of specified matters, but the same result is obtainable by requiring a supermajority that would require minority assent — for example, requiring 80% approval of matters when the minority interest is 25%. NJ law permits increasing the percentage needed to approve a measure to any desired number. Where supermajorities (rather than unanimity) are used, the quorum requirements also need to be adjusted to ensure minority participation in the vote.

A minority shareholder veto reduces the danger of shareholder oppression; however, it can create the problem of deadlocks that can cripple a corporation’s ability to function.

To discuss your NJ shareholder matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Shareholder Attorney

Previous PostNext Post