By Fredrick P. Niemann, Esq., a NJ Business Attorney
New Jersey Businesses take many different forms today. Some prefer to register their business as a corporation, some as an LLC, others as a partnership, etc. Many of these businesses have more than one owner and typically involve family members, friends, or business associates who combine forces to form the business. While we would like to sit back and say everything will go according to plan, businesses often run into disputes pertaining to key issues associated with the company. In these businesses, the owner who owns the largest share of the business gets to call the shots. While they may be able to dictate the direction of the business, it does not follow that minority shareholders must also fall victim to decisions to their detriment.
Those owning the majority share of a business owe what is termed a “Fiduciary Duty of Loyalty” to all other owners in their business, regardless of the percentage of the business they own. This Fiduciary Duty of Loyalty requires all majority business owners to act in a manner that is in the best interests of the business at all times. This effectively forbids them from acting in a way that benefits themselves personally at the detriment of the minority owners. If a business owner breaches this duty owed to the other owners of the business, the other owners can bring a claim in New Jersey Courts.
The Courts will uphold your rights as an owner against such a breach. When such a claim is brought to Court, the Court will look at whether or not the business decision meets an objective fairness standard. If the decision does not meet this objective fairness standard, the owner who ordered the business decision will be found to be in breach of their Fiduciary Duty of Loyalty. This will subject them to damages. Courts may also, under certain circumstances, issue an order preventing the business from completing the action in dispute, assuming the action hasn’t occurred yet.
All business owners are owed a Fiduciary Duty of Loyalty, even if they merely own a minority percentage of the business. Simply because you cannot solely dictate business decisions does not mean you can be taken advantage of. To speak with a qualified NJ Business Attorney today, please call Fredrick P. Niemann, Esq., toll-free, at 855-376-5291 or email him at fniemann@hnlawfirm.com. He would be more than happy to discuss any Business-related inquiries or questions about the Fiduciary Duty of Loyalty you may have. Please call today.