When one of a handful of shareholders in a close corporation decides to sell his shares to another shareholder, is the buying shareholder obligated to offer the other remaining shareholders the opportunity to participate in the purchase on an equal basis? In the absence of a shareholders’ agreement regulating such transfers, is there a common law fiduciary duty to share the shares with the remaining shareholders?
If you answered these questions “no,” you’ll take comfort in a decision issued last week by Kings County Commercial Division Justice David Schmidt in a case called Varveris v. Zacharakos, 2012 NY Slip Op 50947(U) (Sup Ct Kings County May 24, 2012), turning down a bid by a disappointed shareholder to require equal participation in the purchase of a departing shareholder’s shares.
Varveris involves a real estate business known as Jarc Realty Co. formed in 1986 to own and operate a residential apartment building in Brooklyn. Upon incorporation, Jarc’s 200 shares were issued and distributed equally among four shareholders: Zacharakos, Sichenze, Kristiansen and Varveris. After Zacharakos transferred his shares to his wife in 1999, he continued to serve as president. A company initially owned by Zacharakos, and later transferred to his daughter, manages the property.