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Business Partner Disputes Leading to One Partner Being Terminated

I have posted several times (most recently in January) about termination of an employee/shareholder constituting oppression, because this type of misconduct by majority shareholders happens all the time.  If one had a reasonable expectation of continued, even indefinite, employment, the act of termination itself could constitute shareholder oppression under New Jersey law, possibly giving the terminated shareholder the right to be paid for his or her shares.  Or, if one is terminated and then receives no financial benefit for his shares, the mere lack of dividends could be grounds for the terminated employee/shareholder to obtain a buy-out, especially if the majority shareholders continue to give themselves huge (and undeserved) bonuses.

I want to revisit this issue because I have seen majority shareholders actually ratchet up this type of misconduct in light of the stubbornly high unemployment rate.  Unscrupulous business partners have made the argument that they can’t be blamed for firing a minority owner, because the economy is so bad and unemployment is so high.  One adversary even thought this should be an absolute defense to his action – what I dubbed the “things are tough all over” defense.  A majority owner who wants to throw out his business partner will often resort to any morsel of an argument he can latch onto.

Don’t buy it.  If you are a minority owner of a New Jersey company, and the majority owner uses the economy as an excuse to terminate you or eliminate your job, you do not lose your rights as an owner.  You still have the same rights of inspection of certain corporate financial documents; and you still have the right to receive some benefit for your shares, if at all financially possible.  Use these rights, and find out as much about the company’s financial picture as you can.  You may see that your firing was necessary only to permit your business partner to line his own pockets, with you now out of the way.

Perhaps even more importantly, your termination in and of itself might amount to shareholder oppression or misconduct, entitling you to be paid for your shares.  Quite often, the termination occurs after a dispute between business partners has arisen – such as over a suspected fraud, or asking too many financial questions.  Remember, a court will take this timing into account when determining whether you should be paid for your shares.