When a minority shareholder petitions for judicial dissolution on grounds of oppression, New York’s statutory scheme gives respondents the option to avoid a dissolution contest voluntarily by electing within 90 days to purchase the petitioner’s shares for “fair value” in an amount either to be agreed upon by the parties or determined by the court in an appraisal proceeding.
The buy-out statute (Business Corporation Law § 1118) grants the right of election to “any other shareholder or shareholders or the corporation” which, as a practical matter, leaves it up to the controlling shareholders whether to purchase the shares individually or through the corporation. Not surprisingly, in my experience the election overwhelmingly is made by the corporation. After all, who wants to undertake personal liability voluntarily, especially before the court determines the value of the petitioner’s shares and the terms of payment? Continue Reading Who Pays When the Court Compels a Buy-Out?