Am I a Minority Shareholder?

New Jersey’s General Corporations law establishes an important statutory remedy for oppressed minority shareholders in a closely held corporation.  It is critical to understanding your rights as a shareholder, however, to understand who is considered under the statute to be a minority shareholder.  You may well think, I own 50% of the stock in my company so, I can’t possibly be a minority shareholder. Well, if that is what you think, then you are potentially shortchanging yourself.

An owner of 50% of closely held corporation’s stock can be considered a “minority shareholder” within the meaning of N.J.S.A. 14A:12-7(1)(c).  Bonavita v. Corbo, 300 N.J.Super. 179, 188 (N.J.Super.Ch. 1996).  Thus, even where a corporation is owned equally by two shareholders, a court may order an equitable remedy to a shareholder dispute upon proof that the “minority” shareholder has been oppressed, or the majority shareholder has acted fraudulently or illegally, mismanaged the corporation, or abused their authority. Depending upon the particular circumstances of the case, one court has even indicated that in appropriate circumstances the owner of 98% of stock in closely-held corporation could be considered a “minority” shareholder.  The existence of voting agreements and other control restrictions may tilt the playing field in your favor.