Articles Tagged with business dissolution

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  • Divorcing couples that own a business together must address business ownership issues as part of the matrimonial issues, in particular the distribution of assets.

  • An important issue when a couple divorces is how to address the family owned business in which one of the spouses was involved before the marriage.  Courts may  distribute the value of owner’s share to the non-owner spouse.

  • The divorcing couple may also have individual equity interests in a jointly owned business and must decide whether to buy out one of the spouses or continue on together as co-owners.

The divorcing couple that owns a business together has to manage the family and business relationships simultaneously. That typically involves terminating their relationship as well.

And if one of the parties owned the business before the marriage, such as a stake in a family business, it means dissecting the interests of the divorcing spouses in a way that may implicate the interests of still others.

portrait-of-a-confident-young-man-and-woman-workin-2023-11-27-05-08-51-utc-1024x683

Portrait of a confident young man and woman working together on a farm.

In a recent case before the Supreme Court in Montana, the issue was how to deal with a distribution of property when one of the sons of a ranching family was divorced from his wife after more than 30 years of marriage.

Business Divorce Issues Related to Divorcing Business Owners

The wife claimed an interest in the limited partnership that owned the ranch and argued that it should be valued for the purposes of the parties’ property settlement and not as a family business. The limited partnership vigorously disputed that she had any interest in the business.

Contact us for more information or to discuss your issue on business governance issues. 

The case, In re Frost, relies on the liberal provisions of state law that provide that anything owned in whole or in part by the married individuals is distributable in a divorce. The trial court rejected the claim of ownership, but the award in some ways treated the rancher’s wife as if she had. Continue reading

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    • A business divorce is the process by which the owners of a business separate their business interests.  The process involves negotiation and may also require litigation.

    • These cases can be divided into four phases: the emergent phase, the examination phase, the valuation phase and the resolution phase.

    • Most owner lawsuits end in a negotiated transaction because it gives the parties more flexibility over the manner in which the case is resolved.

We’re going to look at business divorce in terms of the four phases that the typical case goes through from its start to the time that is resolved, either through settlement or trial.We should start with the most basic definition of what is a business divorce. I use the term to describe the process by which people who were in a business together disentangle themselves. Continue reading

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  • New York’s BCL requires at least 50 percent of shares to petition for dissolution based on deadlock, unless there has been a failure to elect directors.

  •  The fact that a shareholders agreement required the election of two deadlocked directors was not a basis to waive the statutory requirement.

  • Parties avoid claims of wrongdoing and oppressed shareholder action that could trigger mandatory sale of minority interest.

Oppressed Shareholder lawsuit attorney

Judicial Dissolution Petition Requires 50 Percent Shareholder

A minority shareholder in New York will have a difficult time pursuing a claim for dissolution because of a deadlocked board of directors or a deadlock among the shareholders.  New York law permits a cause of action for judicial dissolution based on deadlock, but only by shareholders with holdings of 50 percent or greater, unless the shareholders are unable to elect directors.

The statute can be harsh in its application, as demonstrated by a trial judge’s decision to dismiss a petition for dissolution under BCL § 1104, the provision of the New York Business Corporations Law that creates a statutory cause of action for judicial dissolution. (We discuss the issue of deadlock in more detail in our series on the topic, here and here.) Continue reading

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New York | New Jersey Oppressed Shareholder Limited Liability Company atorneys
Reading through a recent court opinion out of the New York Supreme Court, I am struck by the way the law has diverged in corporate governance litigation.  There are two distinctly different approaches to the business divorce. Crossing the Hudson can make a world of difference in operating a closely held business.

Business Divorce State by State

Understanding the different approaches taken by the courts of different states is something that should be considered by business owners not just when they form the business, but as they work through the inevitable conflicts that are part of running a business.

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Corporate Dissolution Claims of Foreign Entities Not Proper

Corporations and other business entities are creatures of the law of the state where they were organized. Delaware and Nevada, for example, compete as the state of choice when organizing a new business entity. And the simple fact is that most of the businesses organized under Delaware or Nevada law have no operations in those states.

Does that mean that other courts are limited in the ability to grant relief in the event that litigation develops among the owners over corporate governance issues?  That was the issue in a recent decision by Chancery Judge Carroll in Lerner v. Heidenberg, BER-C-64-12 (Chancery Div. June 8, 2012).  The decision is a warning that electing to organize a company under a particular state’s law may also be a commitment to have the courts of that state resolve certain disputes if things go wrong.

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