Single Business or Amalgamation Theory Applies to Related Businesses

  • The Single Business Theory permits a court to treat related businesses as though they were one enterprise.

  • Courts apply the single business theory in rare cases to prevent injustice.

Pertuis v. Front Roe Rests., Inc., 2018 S.C. LEXIS 85 (2018)

Cases-of-Note-Corporations-300x166Statutes: S.C. Code Ann. § 33-18-420; S.C. Code Ann. § 33-15-105; S.C. Code Ann. § 33-18-200 to -210; S.C. Code Ann. § 33-18-220; S.C. Code Ann. § 33-18-230; N.C. Gen. Stat. § 55-14-31

An action by minority shareholder and manager of three restaurants, two organized in North and one in South Carolina, seeking valuation and purchase of interests as oppressed shareholder, and alleging that each of three closely held “s corporations” are a single business entity located in South Carolina. On appeal, the South Carolina Supreme Court recognizes the amalgamation theory under which multiple enterprises may be treated as single entity, but reverses because plaintiff was not assigned the burden of proof and because a South Carolina court has no authority to consider the internal affairs of a foreign corporation.  (Opinion here.)

  • Held: Finding of amalgamation or single enterprise is not a matter of internal affairs subject to law of the state of organization..
  • Held: Internal affairs doctrine precludes consideration of any issues of shareholder oppression regarding foreign North Carolina Corporations
  • Held: South Carolina recognizes the amalgamation or single business enterprise theory when multiple business enterprises are combined and there is bad faith, abuse, fraud, wrongdoing or injustice resulting from blurring of the entities legal distinctions. The burden of establishing the existence of a single business enterprise is on the party alleging its existence.
  • Held: Under South Carolian law, Subchapter S-Corporations are excused from certain corporate formalities, including a board of directors, annual meetings and by-laws, and the absence of such activities is not a basis for finding the bad faith requisite to holding multiple businesses to be single enterprise or amalgamation.

State of Organization: North Carolina, South Carolina

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