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Grounds for Dissolution of a New York Corporation: Dissolution by Fifty Percent Shareholder when Faced with Director or Shareholder Deadlock

Dissolution of your New York Corporation when Faced with Corporate Deadlock

If you are the owner of a small closely held corporation in New York and are faced with a dispute with your partners and a "corporate deadlock" it is critical that you understand your legal rights under New York law. Important factors that you must evaluate and discuss with your business lawyer include:

Initial Corporate Agreements are Critical

Your legal rights as a shareholder, officer and director will be impacted by the terms, if any, of your shareholder agreements, by-laws and certificate of incorporation. In many instances these documents may expand or limit the legal rights that might otherwise be available to you under New York law.

Director/Shareholder Deadlock: Grounds for Dissolution

Pursuant to section 1104(a) of the New York Business Corporation Law if you are a fifty percent (50%) shareholder you may petition the court to dissolve your New York corporation based on one of the following grounds:

  • That the directors are so divided respecting the management of the corporation's affairs that the votes required for action by the board cannot be obtained.
  • That the shareholders are so divided the the votes required for the election of directors cannot be obtained
  • That there is internal dissection and two or more factions of shareholders are so divided that dissolution would be beneficial to the shareholders.

When faced with shareholder disputes and situations of corporate deadlock in New York, the dissolution rights provided under State law serves as a critical vehicle to protect your overall equity ownership interests and rights.

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