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Conflicts between co-owners in private companies are common, but the vast majority are worked out through dialogue and negotiation. When these internal conflicts cannot be resolved, however, minority investors may file suit...more
Welcome to this year’s Winter Case Notes where, amidst the arctic blast currently sweeping most of the nation, I offer shortish takes on several court decisions in recent business divorce cases. This year’s edition...more
The one who has the gold often makes all the rules, but the majority owner of a private company who has minority partners in the business does not have complete freedom, because majority owners owe duties that apply to their...more
Occasionally, we come across court cases in which the majority owners so egregiously mistreated their minority co-owners that it’s difficult not to write about it — if only as a lesson in what not to do to separate oneself as...more
Earlier this year, using as a springboard the Maryland intermediate appellate court’s decision in Eastland Food Corp. v Mekhaya, I posted about a topic on which there’s little or no New York law, viz., whether a complaint for...more
Potential client sits down with business divorce lawyer and says, “I’m a minority shareholder in XYZ Corp. I’ve been completely frozen out by the majority. Can you help me?” The lawyer says, “Absolutely. New York law gives...more
There are many ways that an owner of a closely-held business can use their superior financial resources to gain an advantage over their co-owners in a dispute. One common way is the use of a capital call provision to dilute...more
When a minority shareholder petitions for dissolution of a corporation on the grounds of oppressive or illegal conduct (see BCL 1104-a), Section 1118 of New York’s Business Corporation Law allows the corporation or any other...more
Private growth companies have ups and downs – only rocket ships tend to go straight up. Therefore, it can be difficult for an investor holding a minority stake in a private company to know whether a challenging time for the...more
When shareholders of a company believe the leaders of the company have breached their fiduciary duties to it, they can bring a lawsuit against those leaders in one of two ways. Shareholders can bring the suit in their own...more
In 1950, Sam Hoffman and his two sons, Hyman and Melvin, founded Brooklyn-based Cornell Beverages, Inc. to manufacture and distribute seltzer. Those were the days when “seltzer men” made weekly home deliveries of cases of...more
I can’t say what the number is, but my own experience tells me that a significant percentage of lawsuits by a minority owner of a closely-held company against those in control of the company include a demand for an...more
The seven-year anniversary of the Texas Supreme Court’s decision in Ritchie v. Rupee has come and gone, and the court’s holding from 2014 remains the law: Minority shareholders in Texas private companies do not have a cause...more
For the second time in two years, the Connecticut Supreme Court has ventured into uncharted waters of LLC governance under the Revised Uniform LLC Act which, to date, has been adopted by 22 states and awaits legislative...more
David F. Johnson presented his paper “Business Divorce: Minority Shareholder Rights In Texas” to the State Bar of Texas’s Business Disputes Course on September 2-3, 2021. This presentation addressed shareholder oppression...more
The right of shareholders to elect a corporation’s directors is one of the most valuable rights attendant to share ownership. Election of directors is where shareholders can directly exert their influence on the corporation,...more
Of late I’ve been ruminating on New York’s membership in the shrinking pool of states that don’t recognize oppression of an LLC minority member by the controlling members or managers as ground for judicial dissolution....more
In my business divorce travels occasionally I encounter instances in which shareholder distributions are made in the period between the valuation date for an elective buyout of a minority shareholder who sued for dissolution...more
When a minority shareholder petitions for judicial dissolution under § 1104-a of the Business Corporation Law based on the majority’s alleged oppressive conduct, looting, waste, or diversion of corporate assets, BCL § 1118...more
This winter forever will be remembered in the Northeast as the winter of the “bomb cyclone,” which gets credit for the 6º temperature and bone-chilling winds howling outside as I write this. So in its honor, I’m accelerating...more