Shareholder Lawsuits and Family Businesses
Shareholder lawsuits against controlling or majority shareholders can arise for a number of reasons. These reasons include: the failure to pay dividends; the failure to properly value shares; disputes arising out of the shareholder agreements; improper disbursements of salary and bonuses and fraudulent practices.
A common theme running through many shareholder disputes is the operation of family businesses where there are a few controlling shareholders. While you would like to believe that your brothers, sisters, cousins, aunts or uncles are operating a business pursuant to their fiduciary duties (the performance of obligations in the best interests of the company and the shareholders), typically these situations can lead to shareholder lawsuits. Perhaps there is a certain comfort level that leads to informalities and eventually claims against the majority shareholders.
In any shareholder lawsuit, an accounting is very important to determine if the company has been properly operated. For example, an accounting should be able to show if the majority shareholders were paying themselves excessive bonuses or if they have been improperly using company funds. For a proper accounting, you will need to retain an accounting firm to perform this analysis (this is often called forensic accounting).
The accountant can serve other purposes such as the valuation of company shares. This is important for example where the majority shareholders are undervaluing the shares in a buyout. The accountant’s valuation serves as a measure to determine lawsuit damages and can be used for purposes of settlement.
Disputes involving family businesses can be uncomfortable for the obvious reason that it is your own family. For example, in the litigation, your attorney may have to take the deposition of your uncle and your case may even go to trial if a settlement cannot be reached. As a result, you should be aware of these variables.
When pursuing a shareholder lawsuit, you want an attorney who will zealously advocate for your rights. Contact the Law Office of H. Benjamin Sharlin LLC for a free initial consultation.
The Law Office of H. Benjamin Sharlin LLC is owned and operated by H. Benjamin Sharlin, Esquire, who is a Spanish-speaking bilingual attorney proud to serve all of Mercer County, New Jersey and the surrounding counties.
Please be advised that this blog is for informational purposes only, is not legal advice and does not create an attorney-client relationship
The Law Office of H. Benjamin Sharlin LLC
is owned and operated by H. Benjamin Sharlin and serves all of Mercer County, New Jersey and the surrounding areas. Mr. Sharlin is a bilingual Spanish-speaking attorney who vigorously represents the interests of all his clients.
Call (609) 585-0606 or click the button below to schedule an appointment