Archive for September, 2009
What are the rights of a minority shareholder in a closely-held business who is not directly involved in running the company and receives no benefit whatsoever for his shares – no salary, no dividend, no benefit of any kind? Of course, the answer depends on the specific facts of any particular case. However, if the company could afford to pay dividends but for the “excess compensation” paid to the majority shareholders, New Jersey law may afford protection to the minority shareholder.
Shareholders find themselves “on the outside looking in” for a variety of reasons. The case of a shareholder-employee who was terminated was addressed in an article dated September 2, 2008. In addition to termination, the shareholder may have simply decided to change fields, or may never have been involved in management, or as an employee, in the first place. Such a situation is more prevalent in a family-run business, in which family members may inherit shares but assume no management role.