Can an Equal 50% Shareholder in a Closely Held New Jersey Corporation be Oppressed?

Minority Shareholder Oppression NJNew Jersey protects the interest of minority shareholders in closely held corporations under the Oppressed Minority Shareholder Statute, N.J.S.A. 14A:12-7.  A “closely held” corporation is one in which there are 25 or less shareholders. N.J.S.A. 14A:12-7(1)(c). Specifically, N.J.S.A. 14A:12-7(1)(c) safeguards minority shareholders from “oppression,” “abuse” or “unfair” treatment by the majority (acting as officers or directors), in the minority shareholders’ “capacities as shareholders, directors, officers or employees.” The remedies provided to minority oppressed shareholders include appointing a custodian, appointing a provisional director, ordering a sale of the corporation’s stock, or dissolving the company. N.J.S.A. 14A:12-7(1).

In a corporation that has two equal 50% shareholders, can either of them be considered a “minority shareholder” so as to come within the class of protected shareholders under N.J.S.A. 14A:12-7? According to the New Jersey Supreme Court, the answer is “yes“.

In Sipko v. Koger, Inc., 214 N.J. 364 (2013), the New Jersey Supreme Court proclaimed that “for the purposes of this statute [N.J.S.A. 14A:12-7], each of two fifty percent shareholders is a `minority’ shareholder. Because a fifty percent shareholder cannot direct outcomes as a fifty-one percent shareholder can, he does not have `control’ of the corporation.” Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 371 n. 7 (1999) (citing Balsamides v. Perle, 313 N.J.Super. 7 (App. Div. 1998); Bonavita v. Corbo, 300 N.J.Super. 179, 187-189 (Ch. Div. 1996)).

Thus,  the inquiry into whether a person is a minority shareholder entitled to exercise the statutory right does not consist of a simple calculation of ownership percentages. Rather, the inquiry requires an examination of the actual degree of control the particular shareholder has over the corporation.

Print Friendly, PDF & Email

Print This Post Print This Post
Enjoy Our Posts?
Follow us on Facebook and Twitter or subscribe to our RSS Feed.
Admitted to NJ Bar in 1990, NY Bar in 1991. Former Judicial Law Clerk to Honorable Peter Ciolino, Assignment Judge, Superior Court of New Jersey, Bergen County. Member & Barrister: Daniel J. Moore Bankruptcy Inn of Court Member & Barrister: Morris Pashman Inn of Court Member: Bergen County Bar Association NJ Superlawyer - 2008, 2009, 2010, 2011, 2012, 2013 Nominated for inclusion in Best Lawyers of America Member: Litigation Counsel of America, Trial Lawyer Honorary Society

Related Posts


Call Now Button