I have written many times about the most common remedy in business divorce litigation: a buyout of the oppressed minority shareholder by the majority. But what if the minority shareholder who is being mistreated wants to be the buyer? Is such a goal realistic?<\/p>\n
One mistake business owners make in determining the strength of their argument in such litigation is focusing too much on what they \u201cwant.\u201d When it comes to a buyout remedy, what one \u201cwants\u201d will hardly ever be the determinative factor. If you and your partner are getting what is casually referred to as a \u201cbusiness divorce,\u201d the company is sometimes regarded as the \u201cchild.\u201d And the court is going to look to the best interest of the \u201cchild\u201d in awarding custody, at least in New Jersey. In other words, the person who is most likely to keep the company in business, and its employees employed, will often be awarded the company.<\/p>\n
Usually that means the majority shareholders will maintain control, because most often they are the ones who have been keeping the company in business, and judges usually prefer not to impose their business judgment on a viable company. While this is nowhere codified in law,\u00a0 the realistic presumption is that the majority will be the buyer. But a case may sometimes be made that it is in the company\u2019s best interest for the minority to be the buyer, not the seller.<\/p>\n
There are cases where the minority shareholder is already managing the company, and the majority shareholders are considered \u201cabsentee owners.\u201d Or there may be a case where the minority shareholder used to run the company but no longer does. If performance has slipped during the reign of new management, an argument may be made that the company\u2019s best interest lies with the resurrection of the old management. Sometimes the conduct of current management is simply so egregious that it is difficult to fathom the company staying in the hands of the wrongdoer. For example, if the shareholder running the company is caught diverting to himself the monies that were supposed to be paid out as employee bonuses, it may be difficult for that owner to argue convincingly that his stewardship is critical to keeping those employees off the unemployment line. Realistically, though, a minority shareholder with no experience running the company will have a hard time convincing the court that they are the better alternative, no matter what the majority may have done.<\/p>\n
An experienced shareholder dispute attorney can help you determine the best remedy for your situation. If circumstances dictate, you just may have a chance at forcing the owners who have been treating you and the company poorly to divest and give control to someone who will treat the company properly. If you are considering business divorce litigation, please do not hesitate to reach out to me<\/a> at dcroberts@norris-law.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" I have written many times about the most common remedy in business divorce litigation: a buyout of the oppressed minority shareholder by the majority. But what if the minority shareholder who is being mistreated wants to be the buyer? Is such a goal realistic? One mistake business owners make in determining the strength of their […]<\/p>\n","protected":false},"author":17,"featured_media":675,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7,110],"tags":[],"coauthors":[160],"acf":[],"yoast_head":"\n