Typically, freeze out scenarios involve majority equity holder(s) of a close corporation leveraging their position to force minority equity holder(s) into acting or refraining from acting in a certain way. The New Jersey Oppressed Shareholder Statute provides a cause of action for any shareholder of a corporation with 25 or fewer shareholders; in which officers, directors or members have acted fraudulently, illegally, mismanaged the business, abused their authority or acted oppressively or unfairly toward the minority, resulting in harm or detriment to the minority shareholder. Depending on the exact nature of this wrongful behavior and its harmful effects, actions can be maintained on behalf of both the shareholder and the corporation.
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When meeting with clients who own small businesses and are also married, I always pose the question to them, “what will happen to your business in the event of divorce?” The alarming number of responses demonstrate a lack of reliability in predicting the outcome of divorce. In fact, the majority of business owners who have taken the initiative to protect their businesses through shareholder and operating agreements are surprised to learn those same agreements provide little to no protection from a future ex-spouse. While operating agreements are one tool for the savvy business owner to protect their investment of time and capital in the business, it is just one piece to an overall comprehensive puzzle which when assembled properly provides owners with the greatest security and predictability. The following five strategies should be considered by every business owner to prepare for both marriage and divorce.

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