Friday, March 23, 2012

Lewis v. S.L. & E., Inc. case brief

Lewis v. S.L. & E., Inc. (2nd Cir. 1980)

Founder broke business into two corporations in order to insulate liability and
minimize estate taxes, while dividing the business according to the interests of the
parties (i.e., actively interested in management versus not interested).
Family failed to manage these two corporations so that the inactive one would retain
its value.

In this case, Court followed the common law rule, which said that in case of an
interested board, the directors would have to prove that the interested transaction was
reasonable and fair. Court found that the transaction was not fair.
Siegel says, however, that some courts might find ‘shareholder beware’ because the
parties did enter into an initial agreement.

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