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Irwin Law
Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 7310
Experience:  30+ yrs. representing small business, real estate, probate
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Can a private company sell a substantial part of the

Customer Question

Can a private company sell a substantial part of the business and not distribute the proceeds of the sale to shareholders according to their ownership interest?
Submitted: 2 months ago.
Category: Business Law
Expert:  Phillips Esq. replied 2 months ago.

Hello: This is Phillipsesq. Welcome to JustAnswer! I am reviewing your post, and I will post my response very shortly. Thank you for your patience.

Expert:  Phillips Esq. replied 2 months ago.

The answer is NO. If the company does that, then the Company needs to be sued to account for the sale proceeds.

Customer: replied 2 months ago.
The argument from their side is that the sale proceeds are coming back to the company and can be used for further investment, perf bonuses, loan repayment etc., therefore severely diminishing what's left over for shareholder distribution. Any legitimacy to that argument?
Customer: replied 2 months ago.
Will switching to phone call require additional payment?
Expert:  Phillips Esq. replied 2 months ago.

The argument from their side is that the sale proceeds are coming back to the company and can be used for further investment, perf bonuses, loan repayment etc., therefore severely diminishing what's left over for shareholder distribution. Any legitimacy to that argument?

Response 1: No, if the rules dictate that the proceeds would be to the shareholders upon the sale of the property.

Will switching to phone call require additional payment?

Response 2: Yes. However, I do not participate in the phone call program. If you make a phone call offer, an Attorney who participates in the program would take the call and further assist you.

Customer: replied 2 months ago.
How to know what the "rules dictate" (referring to your answer above). What if the rules do not address this situation?
Customer: replied 2 months ago.
I only have a ~10% ownership in the company. So curious what option I have if I get <10% in distribution. Can the Board just make a decision on this on how to use the funds received from the asset sale, or must they distribute it per the ownership share?
Expert:  Phillips Esq. replied 2 months ago.

Thank you for the information. However, I am unable to further assist. So, I will opt out to give another Attorney the opportunity to further assist you.

Goodluck with your case,

Expert:  Irwin Law replied 2 months ago.

Hello. I am another expert who is willing to assist. Realistically, the Board of Directors,which is elected by the shareholders has the statutory authority to control the situation that you describe; however, it must be done the best interests of the corporate entity, and not the benefit of a few of the directors. Board of directors must deal fairly with all shareholders; however, the shareholder with a 10% interest in a small, closely held corporation cannot insist on specific actions, that the board does not approve of. That said however, The New Jersey legislature has responded to the concerns of minority shareholders by enacting the “Oppressed Minority Shareholder Statute”. Here is a fairly comprehensive A minority shareholder has rights protected by statute which you will have to read up on. Article written by a New Jersey attorney, which you should read to determine if you have been oppressed by the majority shareholders, which is clearly defined the statutory language. I am sending you the article not amend edition of that attorney, but merely for the information that is contained in the article. https://www.newjerseyshareholdersrightslaw.com/minority-shareholder-rights/#.WR4SeFXyvaQ. I wish you the best in getting matters straightened out satisfactorily

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