New 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.