First a books and records proceeding. Then a declaratory judgment action. Then dissolution proceedings. Six years of litigation including two appellate rulings, just to establish who’s a shareholder and who’s not, all because the owners of two closely held corporations formed decades ago never bothered to issue stock certificates or otherwise attend to corporate formalities.
It didn’t help that the two corporations, formed in the 1960’s, never elected pass-through taxation as subchapter S corporations, hence the companies never issued form K-1’s identifying the shareholders and their stock percentages.
In last week’s appellate ruling in Zwarycz v Marnia Construction, Inc., 2015 NY Slip Op 06239 [2d Dept July 22, 2015], which affirmed a June 2014 post-trial decision by Westchester County Supreme Court Justice Robert DiBella, the plaintiff Michael Zwarycz overcame the absence of a stock certificate or any other direct evidence of share ownership to establish his 50% interest in two corporations that own residential apartment buildings in Yonkers, New York.
Zwarycz’s victory last year before Justice DiBella turned bittersweet, however, when his follow-up petitions to dissolve the two corporations based on deadlock and internal dissension were dismissed by a different judge. Those November 2014 rulings are the subject of Zwarycz’s pending appeals. Continue Reading Fifty Years a Stockholder, Six Years to Prove it in Court