Shareholder Rights Litigation FAQs

Shareholder rights litigation generally refers to legal actions taken by shareholders to enforce or protect their rights as investors in a corporation. These lawsuits can be brought against the corporation, its officers, or directors, and may arise from various situations, such as breaches of fiduciary duty, corporate waste, fraud, minority shareholder oppression, or violations of securities laws.

Shareholders in New Jersey have certain rights and protections under state laws and regulations such as a Right to Information, Voting Rights, Right to Dividends, Preemptive Rights, Right to Inspect Books and Records, Right to Sue, Right to Participate in Shareholder Meetings, Right to Dissent and Appraisal, and a Right to Liquidation Distributions.

Some common reasons to sue as a shareholder include Breach of Fiduciary Duty, Corporate Waste, Fraud or Misrepresentation, Minority Shareholder Oppression, Derivative Lawsuits, Securities Fraud, Breach of Contract. These are just some examples of common reasons to sue as a shareholder in New Jersey. Keep in mind that the specific facts and circumstances of each case will determine whether a valid claim exists. It is crucial to consult with an attorney or legal expert for specific guidance on your situation.

In New Jersey, shareholder rights litigation can take several forms such as Direct Lawsuits, Derivative Lawsuits, and Class Action Lawsuits.

Direct Lawsuits are legal actions brought by shareholders to protect their own individual rights or to recover damages for harm suffered directly by the shareholder. Examples include breach of contract or fraud claims.

Derivative Lawsuit is when a shareholder sues on behalf of the corporation for harm suffered by the corporation itself. The shareholder must typically demonstrate that the corporation’s officers or directors are unwilling or unable to address the issue. Any recovery in a derivative lawsuit goes to the corporation rather than the individual shareholders.

Class Action Lawsuits are when a group of shareholders may come together to file a class action lawsuit against the corporation, its officers, or directors. Class action lawsuits can arise in situations where many shareholders have been similarly harmed, such as securities fraud or misrepresentation.

A breach of contract in shareholder litigation typically occurs when one party fails to fulfill their obligations under a contract, such as a shareholders’ agreement or a company’s bylaws.
Some common examples of breaches in this context may include failure to issue dividends, violation of shareholder rights, misrepresentation or fraud, breach of fiduciary duty, unauthorized issuance or transfer of shares, and amendment of corporate documents.

The process of filing a shareholder’s rights lawsuit can be complex, and the steps and requirements may vary depending on the specifics of your case. It is important before taking any legal action to consult with an experienced attorney who can guide you through the process and advocate on your behalf. You can also attempt to resolve the dispute through negotiation or mediation. If informal resolution is unsuccessful, your attorney will help you determine the appropriate legal remedy. This could include a derivative lawsuit, a direct lawsuit, or an appraisal action, depending on the circumstances.

If you decide to proceed with a lawsuit, your attorney will draft a complaint and file it with the appropriate court, typically the Superior Court of New Jersey in the county where the corporation is located or where the wrongful acts occurred.

After filing the complaint, you will need to serve copies of the complaint and a summons to the defendants. Once the defendants have been served, both parties will engage in discovery, the process of exchanging information and evidence relevant to the case.

Both parties may file pre-trial motions, such as motions to dismiss or motions for summary judgment, to resolve specific issues or potentially avoid a trial altogether. If the case is not resolved through pre-trial motions or settlement, the matter will proceed to trial. The trial may be heard by a judge or a jury, depending on the circumstances. At the conclusion of the trial, the court will issue a judgment, which may include monetary damages, injunctive relief, or other remedies. If either party is dissatisfied with the outcome of the trial, they may appeal the decision to a higher court.