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Important Remedy Available to Minority Shareholders of a New York Corporation: Judicial Dissolution

Minority and Non-Controlling Shareholder and Partner Rights

If you are a minority shareholder in a closely-held New York corporation chances are that you have limited input in the management and affairs of the business that you "partially own". The typical minority shareholder is a passive investor looking to achieve a reasonable rate of return on his or her capital investment.

For the minority shareholder, depending on the terms and conditions of your shareholder agreement, your ability to influence business operations (including asset sales, employment contracts, loan obligations and other long-term obligations) may be limited and non-existent.

However, under New York law minority shareholders (owning and controlling no less than twenty (20%) percent of the stock) faced with acts of corporate abuse and misappropriation of corporate assets are granted the right to

This is a critical right afforded to minority shareholders and is designed to provide majority shareholders from abusing their controlling interests. Pursuant to Section 1104-a of the New York Corporate Business Law, shareholders "representing twenty percent or more of the votes of all outstanding shares of a corporation…" may present a petition of dissolution on one or more of the following grounds:

  1. The directors of those in control of the corporation have been guilty of illegal, fraudulent or oppressive actions toward the complaining shareholders; or
  2. The property or assets of the corporation are being looted, wasted or diverted for non-corporate purposes by its directors, officers or those in control of the corporation.
Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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