
This blog frequently covers cases considering a shareholder’s request to dissolve a corporation under New York’s oppression-based corporate dissolution statute, BCL 1104-a. That statute allows a shareholder to petition for dissolution of a corporation on the grounds that those in control of the corporation have engaged in “illegal, fraudulent or oppressive actions,” (BCL 1104-a[a][1]), or that 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” (BCL 1104-a[a][2]).
But even upon a showing of oppression or other misconduct satisfying the requirements of BCL 1104-a, dissolution is not a given. That is because BCL 1104-a(b) requires the court to consider “whether liquidation is the only feasible means whereby the petitioners may reasonably expect to obtain a fair return on their investment.” Dissolution should be a remedy of last resort, and a court has broad discretion to fashion a less-drastic, alternative remedy to dissolution. Consider, for example, this post about a case ordering a compelled buyout of the complaining shareholder (Zulkofske v Zulkofske, 2012 NY Slip Op 51210(U) [Suffolk Co., 2012]), or this post about a case finding money damages sufficient to remedy the oppressive conduct (Hammad v Jamal Kamal Corp., 68 Misc 3d 1227(A) [Queens Co., 2020]).
Based on the principle that dissolution should be a remedy of last resort, the Court of Appeals in Matter of Kemp & Beatley introduced another layer into the “available remedies” analysis of BCL 1104-a(b). Even when dissolution is an appropriate remedy, the court must give the shareholders the option to save the corporation by buying out the complaining shareholder: “[e]very order of dissolution . . . must be conditioned upon permitting any shareholder of the corporation to elect to purchase the complaining shareholder’s stock at fair value” (64 NY2d 63 [1984]).
Against this backdrop, consider the Second Department’s recent decision in Marum v Graffeo, which affirmed an order of dissolution of a closely-held corporation entered without a hearing, despite contested allegations and apparent non-consideration of alternative remedies (179 NYS3d 621 [2d Dept 2023]).
Continue Reading Dueling Dissolution Petitions Beget Dissolution Without Consideration of Alternate Remedies