Monday, August 6, 2018

The Statute Means What the Statute Says, and 50% is not the Same as 49%

The Statute Means What the Statute Says, and 50% is not the Same as 49%

       Peter Mahler, in his blog New York Business Divorce, reported upon an interesting decision from New York, Balkind v. Nickel, 2018 NY Slip Op 31703(U), [Sup. Ct. NY County July 16, 2018]. In this case, there was a corporation which, pursuant to a shareholder agreement, was run equally by the two shareholders. Each had the right to appoint a director, and functionally all decisions, whether of the board or of the shareholders required unanimity. This equality in treatment did not come about, however, by reason of share ownership. Rather, one shareholder owned 51% of the stock, and the other 49%. Why there was this dissimilarity in share ownership even as there was, by contract, an agreement to treat all shareholders equally, is not discussed in the opinion.

          Under New York law, a 50% shareholder may move for judicial dissolution of the company. In this instance, the 49% shareholder sought judicial dissolution, arguing, inter alia, that the equal position in control of the company should be the focus. In contrast, the 51% owner argued that the statute means what the statute says, namely a 50% shareholder, which the plaintiff was not. The court agreed, holding that where the statute set a threshold of 50%, the 49% shareholder did not have standing to move under that statute.

       Peter Mahler’s review of this decision appears under a posting on July 30 titled 49% Shareholder Can’t Seek Deadlock Dissolution Despite Shareholders’ Agreement Granting Co-Equal Control; HERE IS A LINK to that posting

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