Where a shareholder is no longer able to meet its obligations under the shareholder contract or has committed conduct that prevents the transaction from continuing, a shareholders` pact may resolve the matter by a shareholder purchase or authorize an orderly dissolution of the company by a New Jersey court. Often, shareholders are oppressed when a shareholder ceases his or her employment with the company. If a shareholder is employed by the company for a period of time only to have him terminated unexpectedly, the courts have decided that a worker/shareholder has a reasonable expectation of being employed within the company, and the termination of that activity oppresses the shareholder. In a case dealing with this issue, the New Jersey Supreme Court upheld a court decision ordering majority shareholders to sell their shares to the minority shareholder after the shareholder “devoted the most productive years of his life to the construction of the company,” while one of the majority shareholders was the company`s founder. However, the courts held that a minority shareholder holding 20% of the shares in a catering company where the shareholder was dismissed because he could not reach an agreement with the other executives and that he did not learn that the transaction that carried out him outside the board meetings was not without shareholders. Please email us or call us (973) 890-0004 to discuss the development of a shareholder contract. No shareholder pact is the same or should be. Each transaction is different and each transaction is different, including among the company and its shareholders. In some cases, shareholders can only agree on certain issues to be dealt with as part of a shareholders` pact. Is it possible to successfully claim oppression without access to a company`s accounts and records? As a shareholder, a person has the right to demand access to the minutes of shareholder meetings and “meetings” and to make copies as required in accordance with N.J.S.A. 14A:5-28 (3). But a shareholder cannot access the “books and records of the account” simply by making an application.
Instead, he must ask the court to force access to these records. Paragraph 4 of the statute recognizes this means and allows any shareholder to request access to these accounting documents, regardless of the number of shares he holds or the date on which he obtained his shares. The finding that must be made by a court when the matter is decided is that the shareholder has a “good purpose” to force a review. The law dates back to the common law, which allowed courts to access the records of a limited company when “the application for control was made in good faith and for the purpose of the applicant`s shareholder status.” Cain v. Merck – Co., 415 N.J. Super. 319, 328 (Ca. Div. 2010).
In the Cain decision, the court held that shareholders are not allowed to “conduct a fishing expedition on the basis of allegations of general and unsubstantiated mismanagement.” Rather, they should “make specific and credible accusations of mismanagement before authorizing an inspection.” For example, a review of the commercial documents relating to the results of a failed clinical trial of a new medically prescribed drug tested was a sufficiently useful objective and the tribunal requested that the Board of Directors and the minutes of shareholder meetings be submitted only for inspection, as they were referring to their discussions about the failure of the clinical test.