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Accountant as a Minority Shareholder’s Ally

Lately I have been giving seminars to accountants on how members of that profession should handle business disputes between owners in closely held businesses.  In fact, just last week I gave a presentation on this issue to the accountants at JH Cohn, one of the region’s largest accounting firms.  (I was disappointed that I did not get to meet their spokesperson, Joe Torre, but at least they provided lunch.)  Preparing for these seminars got me to thinking how the company accountant can be a minority owner’s ally in a business dispute between business partners.

To start with, it is critical for a business owner to realize that the accountant often represents the company, and not the individuals.  Therefore, when you, as a minority shareholder, ask an accountant for corporate documents, he/she may not have to give them to you.  In fact, he/she may be prohibited from turning them over if ordered not to by the company president or majority shareholder.  However, that does not mean that the accountant cannot be a useful ally to a minority shareholder.

Often by the time someone reads an article such as this that they found in a Google search, it is too late, and the bitter dispute with one’s business partner has already materialized.  However, if it is not too late, and the dispute is only feared, and has not yet passed the point of no return, there are actions that you can take, often with the help of the company accountant, which can help prevent the dispute from taking place.

For example, it is quite often the failure to share corporate financial information that leads to disputes.  When a minority shareholder feels that he or she is being kept “in the dark,” problems are often not too far behind.  However, the accountant is usually a “trusted business advisor” of all of the business partners, and can be the one who helps establish some guidelines regarding what financial information is to be automatically shared with all shareholders (or members, if an LLC).  If the accountant can be convinced to recommend rules under which information is freely shared among all the owners, perhaps the majority shareholders will listen and establish such guidelines in the beginning.

Some accountants, depending on the personalities of the individual owners involved, may not want to inject themselves in such matters.  However, others may decide that clear rules regarding the free flow of financial information to even the minority shareholders may help keep him or her out of future conflicts among the shareholders.  He may even realize that the free flow of information may maintain the relationship between all of the owners, and may even help save the business from being torn apart.  Because once oppressed minority shareholder litigation is begun, it rarely is a good thing for any New Jersey company.