Protecting Your Investment: When Partner Misconduct Becomes Shareholder Oppression
If December is approaching, that means holiday party season is approaching. Ah, yes. Male and female employees, usually with no spouses present … and copious amounts of alcohol. What could possibly go wrong?
Countless attorneys write blogs and articles about the pitfalls of drunken holiday festivities from a sexual harassment and liability angle. That is not the purpose of this article. Instead, my focus is on the impact of such conduct to a minority business owner. What if the offending holiday party occurs in a small, closely held business and you are that minority owner? What if you are just as disgusted by your business partner’s behavior as the females in the office are (or at least almost as disgusted)? You were not the one made to sit on his lap, but that doesn’t mean you don’t have legal rights.
In New Jersey, shareholder “oppression” by the majority shareholder(s) could give you legal remedies including a potential forced buyout. If boorish behavior is happening at the holiday party, or – worse – on a day-to-day basis in the office, your company is a potential defendant in a lawsuit. Doesn’t that jeopardize your investment? If your investment is put at risk, that could be considered shareholder oppression by a court.
Having your company, and your investment, placed at risk occurs in many more contexts than potential liability for sexual harassment. A majority owner who discriminates racially has harmed not only his victim, but you and your investment, as well. The company is now a potential defendant in a lawsuit that you know may have merit. If the plaintiff wins – as he or she should – you could lose everything. Yet you have done nothing wrong (other than your choice of business partner). Even a majority owner who cheats on the corporate tax returns is subjecting the company to penalties – or worse. Superficially, you might benefit from paying less in taxes, but if the company is prosecuted for tax fraud, aren’t you and your investment harmed?
In other words, there are several ways in which your investment could be put in jeopardy by drunken comments, actions, or simply improper and illegal behavior that are not directed at you, but at others. The harm to one who is discriminated against or harassed is obviously more insidious, and the fact that you complain should not be viewed as belittling or downplaying such harm to others. But you shouldn’t have to feel as if you are playing on the wrong team, and you shouldn’t have to hope your business partner’s conduct doesn’t cost you your entire investment.
If you and your business partner are no longer aligned in what is morally acceptable behavior, and you want your values to be better represented by the company you own, you may be able to force the issue. Speak with an experienced business divorce attorney and tell them that a separation from your business partner is on your holiday wish list.
Please do not hesitate to reach out to me at dcroberts@norris-law.com.
About the Author – Business Divorce in NJ
David C. Roberts, Chair of the firm, specializes in complex commercial litigation, including fraud, trade secrets, and restrictive covenants, with a focus on business partnership and shareholder disputes in New Jersey. Known as business divorce litigation, these disputes often involve shareholder and LLC member oppression, embezzlement, owner freeze-outs, dissenter’s rights, and efforts to dissociate or expel an owner. Dave strives to resolve matters through mediation but is a seasoned trial attorney when needed. He frequently writes and lectures on minority shareholder disputes. With extensive experience representing both minority shareholders seeking buyouts and majority owners defending against such claims, Dave offers unique insight into the strategies and challenges of business disputes, particularly in family-owned companies.