80 A.D.2d 764
SYNOPSIS: Defendant shareholder appealed an order of the Supreme Court, New York County (New York) that granted plaintiff shareholder's motion for partial summary judgment, denied defendant's cross motion for summary judgment that dismissed the complaint, and dismissed defendant's first counterclaim, in an action involving the unanimity provision of the certificate of incorporation.
-Plaintiffs and defendant each owned an equal number of shares of the corporation.
-The parties executed a stockholders' agreement that provided that all corporate operations, including changes in corporate structure, would require unanimous consent of the parties (paragraph 8), no corporate stock would be sold by any stockholder without express written consent of the other stockholders, and if the parties did not mutually agree on a sale, an application would be made for judicial dissolution of the corporation.
-Plaintiffs sought to sell the business and defendant objected.
-Plaintiffs brought an action seeking to strike paragraph 8 of the agreement as void under N.Y. Bus. Corp. Law § 620(b).
-Defendant counterclaimed for reformation of the certificate of incorporation to reflect the unanimity provision of the stockholders' agreement.
-The appellate court concluded it was error to grant partial summary judgment to plaintiffs and to dismiss defendant's first counterclaim because the record warranted granting defendant's motion for partial summary judgment reforming the certificate to reflect the unanimity of the stockholders' agreement.
N.Y. Bus. Corp. Law § 620(b) provides that a provision in the certificate of incorporation otherwise prohibited by law because it improperly restricts the board in its management of the business of the corporation, or improperly transfers to one or more shareholders all or any part of such management otherwise within the authority of the board under this chapter, shall nevertheless be valid if all the incorporators or holders of record of all outstanding shares, whether or not having voting power, have authorized such provision in the certificate of incorporation or an amendment thereof; and if, subsequent to the adoption of such provision, shares are transferred or issued only to persons who had knowledge or notice thereof or consented in writing to such provision
CONCLUSION: Plaintiffs' motion for partial summary judgment was denied, judgment was entered declaring paragraph 8 of the stockholders' agreement valid and binding upon the signatories to that agreement, defendant's motion for partial summary judgment was granted on his first counterclaim, and judgment was entered reforming the certificate of incorporation to include the unanimity provision of the stockholders' agreement.
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