business dissolution

October 1, 2022

Anatomy of a Business Divorce Lawsuit

- A business divorce is the process by which the owners of a business separate their business interests. The process involves negotiation and may also require litigation.
- These cases can be divided into four phases: the emergent phase, the examination phase, the valuation phase and the resolution phase.
- Most owner lawsuits end in a negotiated transaction because it gives the parties more flexibility over the manner in which the case is resolved.

We’re going to look at business divorce in terms of the four phases that the typical case goes through from its start to the time that is resolved, either through settlement or trial.We should start with the most basic definition of what is a business divorce. I use the term to describe the process by which people who were in a business together disentangle themselves. Continue reading

July 30, 2018

Minority Shareholder Lacks Standing to Sue for Dissolution

by Jay R. McDaniel, Esq.

New York’s BCL requires at least 50 percent of shares to petition for dissolution based on deadlock, unless there has been a failure to elect directors.
The fact that a shareholders agreement required the election of two deadlocked directors was not a basis to waive the statutory requirement.
Parties avoid claims of wrongdoing and oppressed shareholder action that could trigger mandatory sale of minority interest.

Oppressed Shareholder lawsuit attorney

Judicial Dissolution Petition Requires 50 Percent Shareholder

A minority shareholder in New York will have a difficult time pursuing a claim for dissolution because of a deadlocked board of directors or a deadlock among the shareholders. New York law permits a cause of action for judicial dissolution based on deadlock, but only by shareholders with holdings of 50 percent or greater, unless the shareholders are unable to elect directors.

The statute can be harsh in its application, as demonstrated by a trial judge’s decision to dismiss a petition for dissolution under BCL § 1104, the provision of the New York Business Corporations Law that creates a statutory cause of action for judicial dissolution. (We discuss the issue of deadlock in more detail in our series on the topic, here and here.) Continue reading

October 4, 2016

Business Divorce New York Style

by Jay R. McDaniel, Esq.

Reading through a recent court opinion out of the New York Supreme Court, I am struck by the way the law has diverged in corporate governance litigation. There are two distinctly different approaches to the business divorce. Crossing the Hudson can make a world of difference in operating a closely held business.

Business Divorce State by State

Understanding the different approaches taken by the courts of different states is something that should be considered by business owners not just when they form the business, but as they work through the inevitable conflicts that are part of running a business.

October 4, 2012

No Jurisdiction of Claim Seeking Dissolution of NY Corporations

by Jay R. McDaniel, Esq.

Corporate Dissolution Claims of Foreign Entities Not Proper

Corporations and other business entities are creatures of the law of the state where they were organized. Delaware and Nevada, for example, compete as the state of choice when organizing a new business entity. And the simple fact is that most of the businesses organized under Delaware or Nevada law have no operations in those states.

Does that mean that other courts are limited in the ability to grant relief in the event that litigation develops among the owners over corporate governance issues? That was the issue in a recent decision by Chancery Judge Carroll in Lerner v. Heidenberg, BER-C-64-12 (Chancery Div. June 8, 2012). The decision is a warning that electing to organize a company under a particular state’s law may also be a commitment to have the courts of that state resolve certain disputes if things go wrong.

A business divorce is the process by which the owners of a business separate their business interests. The process involves negotiation and may also require litigation.

These cases can be divided into four phases: the emergent phase, the examination phase, the valuation phase and the resolution phase.

Most owner lawsuits end in a negotiated transaction because it gives the parties more flexibility over the manner in which the case is resolved.

New York’s BCL requires at least 50 percent of shares to petition for dissolution based on deadlock, unless there has been a failure to elect directors.

The fact that a shareholders agreement required the election of two deadlocked directors was not a basis to waive the statutory requirement.

Parties avoid claims of wrongdoing and oppressed shareholder action that could trigger mandatory sale of minority interest.

Judicial Dissolution Petition Requires 50 Percent Shareholder

Business Divorce State by State

Corporate Dissolution Claims of Foreign Entities Not Proper