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Minority Oppression: Course of Dealing to Establish the Reasonable Expectations of the Shareholders

By Scott I. Unger

When meeting a new client, I  am often asked what constitutes minority oppression?  That is a difficult question to answer because there is not a 'one size fit all' definition of what constitutes minority oppression.  As described in previous blog posts, New Jersey law focuses on the 'reasonable expectations of the shareholder.'  When representing oppressed minority shareholders, I focus on at least three important issues.  They are:

1. what are the reasonable expectations as a shareholder?
2. what is the basis of those expectations; and
3. how were those expectations breached?

One thing I focus on when considering those three important questions is the course of dealing between the shareholders. The course of dealing can be extremely important in establishing the shareholder's reasonable expectations. For example, in one of my minority oppression cases, my client received company financial records for more than ten years.  After that ten plus year period, the majority unilaterally decided to prevent the minority shareholder from reviewing the closely held company's books and records. The course of allowing my client to review the books and records for the ten plus year period could be used to establish that my client had the reasonable expectation to receive and review the company's books and records. 

Full post as published by New Jersey Law Blog on December 22, 2010 (boomark / email).