/>iUnder the category of “be careful what you wish for because you just might get it,” you need to give some thought to what remedy you actually want in the event you file shareholder dispute litigation against your business partner. After all, if you are suing your business partner, you should plan on winning.
As readers of this blog know, the most common remedy afforded a minority shareholder is a buyout. That is, a minority shareholder who is “oppressed” under New Jersey law is usually entitled to have his or her shares purchased by the majority. Often the ensuing fight is over whether the shares are purchased at a discount or not. Sometimes, though, the minority shareholder wants to be the buyer and not the seller. After all, if you are the one who effectively runs the business, and the majority shareholders are less active – or even absent - aren’t you in a better position to run it going forward?
What often gets overlooked, however, is what happens if you win? What if you convince the court not only that you have been oppressed, but that you should be the buyer? If you own a 25% interest, that means the majority must purchase 25% interest in the company to buy you out. But if you are the buyer, you must purchase a 75% interest, which might cost you three times as much money. Can you really afford to buy out your partners? A settlement can of course include negotiated payment terms. Even so, you aren’t likely to get years to pay. You may have to produce the money up front – or very nearly up front.
This often means you must take out a substantial loan. Can you even borrow enough? How can you know the answer if you aren’t sure of the company’s value? Does it make sense to go through costly business divorce litigation if you don’t know the value, and therefore can’t determine whether you can even borrow what you would need to be the buyer?
When you apply, not only must you have some idea of value, but you will need company business records. Do you have access? Do you need your attorney to get you these records before you even file suit? As a backup, are you prepared to sell the company if you can’t afford to buy it?
Nothing is as simple as it seems - not even selecting your oppression remedy. An experienced business divorce attorney can help you navigate these thorny issues, sometimes even before filing suit.
