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What Law Applies When Interpreting Your Shareholder Agreement?

Date: 08/03/2012 | Category: Partnership Disputes | No comments

Many time small closely-held New York based businesses are incorporated in a foreign state.  Typically Delaware and similar tax friendly states.  So‚ it is quite common to have a local New York business that operates‚ exclusively‚ from the State of New York but is‚ nevertheless‚ a Delaware corporation.  That is the company was incorporated in the State of Delaware.

So‚ when it comes to understanding your legal rights under your shareholder agreement‚ what law applies?  New York or Delaware? 

Short Answer: New York law applies‚ but New York law will apply Delaware law in interpreting your shareholder agreement.

Explanation:  If your business is located in New York and you are located in New York (even though your company was incorporated in the State of Delaware)‚ when faced with a shareholder dispute‚ chances are‚ that New York will be the best forum for your litigation.  So‚ overall New York will apply.  However‚ under New York law‚ when issues of shareholder rights are raised‚ New York law requires that courts evaluate and utilize the shareholder laws of the incorporation state.  When it comes time to interpreting your shareholder rights‚ in this example‚ a New York judge will evaluate your shareholder agreement based upon the laws of the State of Delaware.

Involved in a Shareholder Dispute? We recommend requesting a complimentary copy of:
"The New York and New Jersey Partnership Dispute Guide"

Why This Is Relevant:  Many times lawyers overlook application of a foreign states law.  Many just assume that since the litigation is based in New York that the shareholder agreement must be interpreted‚ exclusively‚ based upon New York law.  This is not the case.  So if you are involved in a partnership or shareholder dispute if your company was incorporated outside New York‚ speak to your attorney what law will govern your dispute and if there are advantages to claiming application of another State shareholder laws.

To learn more about a proven course of action and plan to protect and defend your interests as a New York or New Jersey partner‚ shareholder‚ or member contact Partnership and Shareholder Lawyer Charles N. Internicola‚ Esq. at 1.800.976.4904 or contact us by email.


By New York and New Jersey Shareholder Dispute Lawyer Charles N. Internicola‚ Esq. 

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As a shareholder it is critical to understand the  To speak with Mr. Internicola about a shareholder dispute call 1.800.976.4904 or contact us through our web form.

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