December 5, 2022

Volume XII, Number 339

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December 05, 2022

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Some Business Partners Are Blaming COVID as an Excuse for Bad Behavior

A business partner who has been planning to take over operations entirely, freezing out his co-owner, may have found the perfect opportunity with the COVID pandemic.

The horror and tragedy of the pandemic have not stopped some business owners from using it as an excuse in an attempt to justify truly unjustifiable actions. Some minority owners have flat-out been told that they can no longer come into the office due to an effort to minimize office population because of COVID. While that may make sense on the surface – at least in some companies – it can also be a transparent attempt to minimize the involvement of a minority shareholder, especially if that person is literally the only one (or one of just a handful) told not to come in.

Excuses

In one case, a minority owner who did not feel comfortable working in the office at the height of the pandemic was terminated as an employee in what was, in hindsight, an obvious attempt to get that owner to sell her 20 percent interest at a discount.  In another example, a 50/50 owner who does not actively work in the company was denied business records from both his partner and the company accountant, who somehow blame the pandemic for their year-and-a-half refusal to share financial information.  (Amazingly, these same people could enter financial information, yet somehow were unable to share it.)

The common denominator in these instances is a majority shareholder who is trying to accrue additional power and gain a further advantage over a minority shareholder. All too often, power-hungry majority shareholders are willing to use a worldwide crisis as “cover” to achieve their ends.

Business Partners’ Bad Behavior

While this may work for the majority shareholder initially, it may fail in the long run. At least, it likely won’t work if the minority shareholder fights back. Courts generally do not allow the pandemic as an excuse for improper behavior.(Although some courts are unwittingly allowing litigants to “get away with murder” by failing to act quickly due to the pandemic.)  No one can get away for long with blaming the pandemic for not sharing basic financial information. And a 20 percent business owner who could easily work remotely, but instead is fired and then receives an offer to buy his shares at half what they are worth, likely has a legal remedy.

If the answers and the treatment you are receiving feel wrong to you, and COVID seems like a flimsy excuse, you may have rights. Be sure to contact an experienced business divorce attorney to explore them.

©2022 Norris McLaughlin P.A., All Rights ReservedNational Law Review, Volume XI, Number 302
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About this Author

David C. Roberts Member  New Jersey fraud, fraudulent transfers, trade secret, restrictive covenant litigation, employment litigation, environmental matters, and insurance coverage litigation.
Member

David C. Roberts, Co-Chair of the firm’s Litigation Practice Group, devotes his practice to handling complex commercial litigation matters, such as fraud, fraudulent transfers, trade secret, restrictive covenant litigation, employment litigation, environmental matters, and insurance coverage litigation.

His practice has a particular emphasis on partnership and shareholder disputes, including oppression and dissenter’s rights cases, with a focus on attempting to resolve matters through mediation, if such an approach fits within client’s goals and objectives.  In 2007, Dave launched...

908-252-4205
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