Section 1104-a of the Business Corporation Law (the BCL) empowers courts to dissolve a corporation if the petitioning shareholder can establish either of two specified grounds for dissolution. Section 1104-a(a)(1) authorizes dissolution upon a showing of ” illegal, fraudulent or oppressive actions toward the complaining shareholders” by the “directors or those in control of the corporation” (emphasis added). Section 1104-a(a)(2) authorizes dissolution upon a showing that property or assets of the corporation are being “looted,…

Article 12 of New York’s Limited Liability Company Law authorizes the formation of professional service limited liability companies (PLLC). Eligible professions include lawyers, medical doctors, accountants, architects, and various other licensed occupations. Article 12 merely regulates the formation and the professional membership of PLLCs. Otherwise, PLLCs are governed by the same provisions of New York’s LLC Law applicable to non-professional LLCs. I’m unfamiliar with the organizational or tax-related advantages or disadvantages, if any, peculiar to…

Buyers of fine art must investigate the work’s provenance before closing the deal. The same holds true for anyone contemplating the acquisition by assignment of a membership interest in a limited liability company. Not only must the assignee-to-be determine the provenance of the assignor’s membership interest, the LLC’s operating agreement also must be consulted for restrictions on transfer rights and, assuming transfer is permitted, whether an assignment conveys full membership rights or an economic interest…

Welcome to this year’s edition of Winter Case Notes in which I highlight a collection of recent court decisions of interest to business divorce aficionados by way of brief synopses with links to the decisions for those who wish to dig deeper. This year’s synopses feature decisions by courts in New York, Colorado, and Delaware: dismissing a minority shareholder’s dissolution petition brought outside the limitations period; affirming a minority shareholder’s standing to sue derivatively where her stock sale to a third party was deemed…

Business Divorce 101: To be entitled to an accounting of a closely-held business, the plaintiff or petitioner must demonstrate the existence of a fiduciary relationship giving rise to a duty to account. Almost always, that requires establishing ownership status in the business — the existence of a general partnership, ownership of shares of stock in a corporation, possession of a membership interest in an LLC, etc. Can one obtain a judicially-imposed accounting of a closely-held business in…

I’ve yet to see him make a court appearance, and hope I never do, but the Grim Reaper sure has a knack for disrupting business divorce litigation involving LLCs and limited partnerships. To begin with, the statutory default rules for New York limited partnerships and limited liability companies essentially are the same for transfer of ownership interests and rights of the estate of a deceased partner or member. This is no coincidence. Many provisions in the LLC Law enacted in 1994 are modeled on the Revised Limited Partnership…

The case of Shapiro v Ettenson ranks as one of the more consequential ones in the realm of New York’s LLC jurisprudence. For those not familiar with the case, about which I’ve posted before here and here, in 2015 the lower court ruled, and in 2017 the appellate court affirmed, that Section 402 (c) (3) of New York’s LLC Law authorized two members holding a majority interest in a three-member LLC to enforce against the third member, who never approved…