NYLE Business Associations questions with verified
answers
Can a contract or transaction of an interested director still be allowed if not
approved by directors or shareholders? Ans✓✓-Yes. If an interested director
contract is not approved as stated above, the contract is still not voidable if the
party or parties establish affirmatively that the contract was fair and reasonable
to the corporation at the time it was approved by the board or shareholders.
Can a minority shareholder petition for judicial dissolution? Ans✓✓-Yes, under
s.1104-a of BCL. The holders of 20% or more of the outstanding shares of closely
held business corporation may seek dissolution of the corporation on the grounds
that: (1) the directors have been guilty of illegal, fraudulent or oppressive actions
toward the complaining shareholder; or (2) the assets of the corporation are
being looted, wasted or diverted for non-corporate purposes by its directors or
officers or those in control. The court in making a determination whether to
involuntarily dissolve the corporation must consider whether liquidation is the
only feasible means for a shareholder to obtain a fair return and whether
liquidation is reasonably necessary for the protection of the rights of any
substantial number of shareholders.
Can an interested director's vote be counted? Ans✓✓-Yes. director's votes are
counted for such purpose if:
The material facts as to such director's interest in such contract and as to any
such common directorship or financial interest are disclosed in good faith or
known to the board, and the board approves such contract or transaction by a
vote sufficient for such purpose without counting the vote of such interested
director, or, if the votes of the disinterested directors are
insufficient to constitute an act of the board, by unanimous vote of the
disinterested directors; or
,If the material facts as to such director's interest in such contract and as to any
such common directorship or financial interest are disclosed in good faith or
known to the shareholders entitled to vote thereon, and such contract is
approved by vote of such shareholders.
Can officers be removed with or without cause? Ans✓✓-Officers may be removed
by the board with or without cause (BCL 715, 716).
Can the interested director be counted to establish quorum? Ans✓✓-Yes. The
interested director may be counted to establish a quorum
Do shareholders have an appraisal right? Ans✓✓-Yes. New York gives any
dissatisfied shareholder of a domestic corporation who dissented from certain
types of corporate action - a minimum ownership interest is not required -
appraisal rights, specifically, the right to petition the courts for the fair cash value
of his or her shares. The purpose is to allow a corporation to proceed with an
action it views as beneficial, while protecting the rights of dissenting
shareholders.
Does an abstention constitute a vote? Ans✓✓-No. Except as otherwise provided
in the certificate of incorporation or a by-law adopted by the shareholders, an
abstention shall not constitute a vote cast (BCL 614).
Duties and liabilities of shareholders, officers and directors: Ordinarily prudent
person standard and business judgment rule: BCL 715, 717 Ans✓✓-Pursuant to
the business judgment rule (BCL 715, 717), officers and directors must perform
their duties in good faith and with that degree of care which an ordinarily prudent
person in a like position would use under similar circumstances. In performing this
duty, they are entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case prepared or
, presented by:
• One or more other officers or employees of the corporation or of any other
corporation of which at least 50% percent of the outstanding shares of stock
entitling the holders thereof to vote for the election of directors is owned directly
or indirectly by the corporation, whom the officer believes to be reliable and
competent in the matters presented; or
• Counsel, public accountants or other persons as to matters that the officer
believes to be within such person's professional or expert competence, so long as
in so relying he or she shall be acting in good faith and with such degree of care,
but the officer shall not be considered to be acting in good faith if he or she has
knowledge concerning the matter in question that would cause such reliance to
be unwarranted.
In addition, a director is entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, presented by
a committee of the board upon which he or she does not serve, as to matters
within its designated authority, which degree of care which an ordinarily prudent
person in a like position would use under similar circumstances, but a director
shall not be considered to be acting in good faith if he or she has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted (BCL 717).
An officer or director who so performs his or her duties sh
Duties and liabilities of shareholders, officers and directors: Statutory liabilities of
shareholders, officers and directors: BCL 630, 719, 720 Ans✓✓-Statutory
liabilities of shareholders, officers and directors: BCL 630, 719, 720
The ten largest shareholders of closely held corporation are jointly and severally
liable to its employees for all wages due them for services they performed for the
corporation (BCL 630).
answers
Can a contract or transaction of an interested director still be allowed if not
approved by directors or shareholders? Ans✓✓-Yes. If an interested director
contract is not approved as stated above, the contract is still not voidable if the
party or parties establish affirmatively that the contract was fair and reasonable
to the corporation at the time it was approved by the board or shareholders.
Can a minority shareholder petition for judicial dissolution? Ans✓✓-Yes, under
s.1104-a of BCL. The holders of 20% or more of the outstanding shares of closely
held business corporation may seek dissolution of the corporation on the grounds
that: (1) the directors have been guilty of illegal, fraudulent or oppressive actions
toward the complaining shareholder; or (2) the assets of the corporation are
being looted, wasted or diverted for non-corporate purposes by its directors or
officers or those in control. The court in making a determination whether to
involuntarily dissolve the corporation must consider whether liquidation is the
only feasible means for a shareholder to obtain a fair return and whether
liquidation is reasonably necessary for the protection of the rights of any
substantial number of shareholders.
Can an interested director's vote be counted? Ans✓✓-Yes. director's votes are
counted for such purpose if:
The material facts as to such director's interest in such contract and as to any
such common directorship or financial interest are disclosed in good faith or
known to the board, and the board approves such contract or transaction by a
vote sufficient for such purpose without counting the vote of such interested
director, or, if the votes of the disinterested directors are
insufficient to constitute an act of the board, by unanimous vote of the
disinterested directors; or
,If the material facts as to such director's interest in such contract and as to any
such common directorship or financial interest are disclosed in good faith or
known to the shareholders entitled to vote thereon, and such contract is
approved by vote of such shareholders.
Can officers be removed with or without cause? Ans✓✓-Officers may be removed
by the board with or without cause (BCL 715, 716).
Can the interested director be counted to establish quorum? Ans✓✓-Yes. The
interested director may be counted to establish a quorum
Do shareholders have an appraisal right? Ans✓✓-Yes. New York gives any
dissatisfied shareholder of a domestic corporation who dissented from certain
types of corporate action - a minimum ownership interest is not required -
appraisal rights, specifically, the right to petition the courts for the fair cash value
of his or her shares. The purpose is to allow a corporation to proceed with an
action it views as beneficial, while protecting the rights of dissenting
shareholders.
Does an abstention constitute a vote? Ans✓✓-No. Except as otherwise provided
in the certificate of incorporation or a by-law adopted by the shareholders, an
abstention shall not constitute a vote cast (BCL 614).
Duties and liabilities of shareholders, officers and directors: Ordinarily prudent
person standard and business judgment rule: BCL 715, 717 Ans✓✓-Pursuant to
the business judgment rule (BCL 715, 717), officers and directors must perform
their duties in good faith and with that degree of care which an ordinarily prudent
person in a like position would use under similar circumstances. In performing this
duty, they are entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case prepared or
, presented by:
• One or more other officers or employees of the corporation or of any other
corporation of which at least 50% percent of the outstanding shares of stock
entitling the holders thereof to vote for the election of directors is owned directly
or indirectly by the corporation, whom the officer believes to be reliable and
competent in the matters presented; or
• Counsel, public accountants or other persons as to matters that the officer
believes to be within such person's professional or expert competence, so long as
in so relying he or she shall be acting in good faith and with such degree of care,
but the officer shall not be considered to be acting in good faith if he or she has
knowledge concerning the matter in question that would cause such reliance to
be unwarranted.
In addition, a director is entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, presented by
a committee of the board upon which he or she does not serve, as to matters
within its designated authority, which degree of care which an ordinarily prudent
person in a like position would use under similar circumstances, but a director
shall not be considered to be acting in good faith if he or she has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted (BCL 717).
An officer or director who so performs his or her duties sh
Duties and liabilities of shareholders, officers and directors: Statutory liabilities of
shareholders, officers and directors: BCL 630, 719, 720 Ans✓✓-Statutory
liabilities of shareholders, officers and directors: BCL 630, 719, 720
The ten largest shareholders of closely held corporation are jointly and severally
liable to its employees for all wages due them for services they performed for the
corporation (BCL 630).
