Shareholder Disputes and Business Divorce Litigation

When co-owners can no longer work together, New York law gives real leverage - to whichever side uses it first.

A "business divorce" is what happens when the partners, shareholders, or members of a closely held company reach the point where they cannot run the business together anymore. New York's Business Corporation Law gives minority owners real remedies, and it gives majority owners a real way to end the fight on their terms. Which side you are on changes the strategy completely.

Grounds for Dissolution - BCL Section 1104-a

A shareholder holding 20% or more of the voting shares of a closely held corporation may petition a court to dissolve the company on the ground that the people in control have engaged in illegal, fraudulent, or oppressive conduct toward the minority. Oppression is a specific legal standard: conduct that defeats the reasonable expectations a minority owner had when they bought into the business.

What Typically Counts as Oppression

Being frozen out of management- removed from a role you held, cut out of decisions you used to be part of.
Withheld distributions or salary- especially where the majority continues to pay themselves.
Self-dealing- the majority using company assets or opportunities for personal benefit.
Diverted business opportunities- the company's work quietly moved to a new entity the majority controls.
Blocked access to books and records- being kept in the dark about how the company you own is actually doing.

The Other Side - The Section 1118 Buyout Election

When a minority shareholder petitions for dissolution under Section 1104-a, the corporation or the other shareholders can stop the dissolution proceeding in its tracks by electing, under BCL Section 1118, to purchase the petitioner's shares for "fair value." That converts a fight about whether the company should be dissolved into a fight about what one owner's stake is worth - a very different, and often much more favorable, fight for the majority.

Fair value is determined as of the day before the dissolution petition was filed. Both sides typically retain expert appraisers, and the valuation proceeding is litigated like a mini-trial. Courts can also award interest, often at the statutory 9% rate, from the petition date to the date of payment.

We Represent Both Sides of a Business Divorce

For minority owners, that means pursuing dissolution and oppression claims, forcing a fair buyout, and bringing breach of fiduciary duty claims under BCL Section 717 against controlling owners who have not dealt fairly. For majority owners and the companies themselves, that means electing to buy out a petitioning shareholder before the dispute spirals into a fight over control of the business, defending against oppression allegations on the merits, and keeping day-to-day operations out of a courtroom.

What the Law Still Requires

The 20% threshold applies to corporations under Section 1104-a. Partnerships and LLCs have parallel, but not identical, dissolution and dissociation remedies - the vehicle matters.
Fair value is genuinely contested, not a formality. Expect a real fight between competing appraisers over methodology and discounts.
Timing changes leverage. Electing to buy out early can cut off discovery into the majority's conduct; waiting can expose the majority to a fuller oppression case.

Frequently Asked Questions

I own less than 20% of the company. Do I have any rights?

Yes. The 20% threshold applies to a dissolution petition under BCL Section 1104-a, but breach of fiduciary duty claims under Section 717 and other remedies are not limited to owners above that threshold.

Can the majority just buy me out to make the case go away?

Yes, that is exactly what the BCL Section 1118 election allows. But the price has to reflect fair value, and you are entitled to litigate that value with your own expert.

What if there's no written shareholder agreement?

New York's default fiduciary duty and dissolution protections apply regardless. A written agreement can change the analysis, but its absence does not leave a minority owner unprotected.

How is fair value determined?

As of the day before the petition was filed, typically through competing expert appraisals and a valuation proceeding that functions like a mini-trial before a judge.

I'm the majority owner and I've been accused of oppression. What are my options?

Generally either electing to purchase the petitioning shareholder's shares under BCL Section 1118, or defending on the merits that your conduct did not defeat the minority's reasonable expectations. Which option makes sense depends heavily on the facts and the company's finances.

Facing a Business Divorce? Talk to a Litigator First.

Call (212) 295-5838

Consultations by appointment. Мы говорим по русски.

Attorney Advertising. Prior results do not guarantee a similar outcome. This page provides general information, not legal advice.