Is There a “Deadlock” When the Equal Shareholders Disagree?

Is There a “Deadlock” When the Equal Shareholders Disagree?

      Under the Kentucky Business Corporation Act, dissolution of the corporation may be ordered when the directors are deadlocked as to the operation of the business and the shareholders are not able to break that deadlock. See KRS § 271B.14-300. New York has a similar, but not identical, statute. Peter Mahler, in his blog New York Business Divorce, reviews a recent decision Pokoik v. Norsel Realties, in which a New York court struggled to apply that statute. HERE IS A LINK to Peter Mahler’s review of that dispute.

      In a case out of Delaware, Feldman v. Yidl Trust, Ca. No. 2017-0253-ABG (Del. Ch, March 5, 2018), the court applied section 273 of the Delaware General Corporation Law which, as characterized by Frances Pileggi, allows for no-fault business divorce where the statutory criteria are met. In this instance, the only asset of the corporation was a vote, and the two shareholders were not able to get along and agree as to its use, as well as disputing the allocation of costs and expenses associated with ownership and maintenance of the boat. On that basis, dissolution was ordered. We can debate whether this case is simply proof of the adage that “a boat is a hole in the water into which you pour money.”