Oppression in a Limited Liability Company: Remedies When There Is No “Minority Shareholder”
- On April 12, 2019
A “minority oppression claim” under New Jersey law has historically been tailored specifically for a minority shareholder who is suffering from oppression at the hands of majority shareholder(s) of a close corporation (i.e. less than 25 shareholders). New Jersey’s minority shareholder statute provides a panoply of possible relief to remedy such problems including an award of monetary damages, punitive damages, appointment of a fiscal agent or statutory receiver to manage the company, and/or obtaining a court order that the majority shareholders, or the company itself, purchase the minority shareholder’s interest at fair value.
The hybrid nature of a limited liability company under New Jersey law, a mixture of the architecture of a corporation with partnership attributes, was not initially afforded such remedies for minority oppression relief. The parameters of New Jersey’s original Limited Liability Company Act did not provide any redress to members who were oppressed by their “partners”. However, the 2014 enactment of New Jersey’s Revised Uniform Limited Liability Company Act, (“RULLCA”) changed the landscape for oppression inflicted on a member(s) in a New Jersey limited liability company. The RULLCA does specifically deliver relief to member(s) for oppression incurred from the operations and/or management of the company by other members or co-owners. Significantly, the RULLCA does not require that the oppressed owner be a “minority interest”, as is otherwise mandated by the corporate statute. The RULLCA also provides that any member who is victimized by oppression may institute a court action to dissolve the company, where the company or other members “have acted, are acting or will act in a manner that is illegal or fraudulent; or have acted or are acting in a manner that is oppressive and was, is or will be directly harmful….”
The various avenues of relief available under the RULLCA mirror the corporate statute. However, remedies for claims of membership oppression are not limited to dissolution, but include the court’s discretion to appoint an independent custodian or fiscal agent to manage the company, and to order the sale of all of the oppressed member’s interest to either the company itself, or any other member who is a party to the court action.
Therefore, if you are an owner of a limited liability company and your co-owner(s) or “partner” is operating your company in an illegal, fraudulent or oppressive manner, you do not need to, and should not, suffer in silence. New Jersey’s limited liability company law, the RULLCA, does provide remedies for you to pursue against your co-owners to protect your own interests in the company.
Respond Law counsels limited liability companies, partnerships and corporations throughout New Jersey. To schedule a consultation, call today at 732-462-7170.