When a minority shareholder petitions for judicial dissolution under § 1104-a of the Business Corporation Law based on the majority’s alleged oppressive conduct, looting, waste, or diversion of corporate assets, BCL § 1118 kicks in, granting the corporation and the other shareholders the right to halt the dissolution proceeding and to convert it to a stock appraisal proceeding, by electing to purchase the petitioner’s shares for “fair value” determined as of the day before the date on which the petition was filed.
New York’s highest court, in Matter of Pace Photographers, Ltd., described § 1118’s election to purchase as “a defensive mechanism [to § 1104-a] for the other shareholders and the corporation, giving them an absolute right to avoid the dissolution proceedings and any possibility of the company’s liquidation” while, at the same time, “the minority is protected by a court-approved determination of fair value and other terms and conditions of the purchase.”
How is the election exercised? Who can exercise it? Can it be exercised conditionally? When can it be exercised? Once exercised, can it be revoked? Read on for the answers. Continue Reading A Deep Dive Into the Election to Purchase in Dissolution Proceedings