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A Minnesota Appeals Court recently ruled that a father could not terminate his son as the president of the family-owned business because the father did not have authority to do so under the company’s by-laws.  Call v. Call, No. A19-0074 (Minn. Ct. App. Sept. 3, 2019).  This case involved a dispute between the owners of a manufacturing company, Winco, Inc., that had been in existence since 1927.  Ralph Call had been Winco’s sole shareholder for decades.  In 2009, Ralph’s son Daniel joined the company with the understanding that Daniel “would eventually own a significant share of Winco.”  By 2017, Daniel owned 65% of Winco’s shares as a result of a series of transfers from Ralph.  Winco’s board of directors also had appointed Daniel president of the company in 2014, while Ralph remained its CEO.
Continue Reading When Terminating Officers in the Family-Owned Business, Follow the By-Laws

Owners of family-owned businesses sometimes enter into agreements between each other for the purchase and sale of shares in the business.  Ideally, these agreements are negotiated, documented and implemented in a way that each party is satisfied with the result – e.g., one owner acquires additional shares while the other owner receives the agreed-to cash value for the shares and exits the business.  But sometimes one party (often the seller) will claim that the deal was not fair, that he or she did not in fact receive the full value of the shares or that the agreement should be voided due to “economic duress.”
Continue Reading Watch Out For Claims Of Economic Duress After Purchasing Shares In A Family-Owned Business

A judge in the Supreme Court for the State of New York recently allowed a petition for “common law dissolution” of a family-owned business filed by one shareholder to proceed despite the arguments of the other shareholders that the case should be dismissed.  Yu v. Bong Yu, Docket No. 656611/2016, Supreme Court, New York County (August 15, 2018).  Patrick Yu claimed that he was a shareholder of Moklam Enterprises, Inc.  The remaining owners allegedly include his father, Bong Yu, his brother, Raymond Yu, and his sister, Catherine Yu.  Moklam was an entity that funded the Yu family’s various real estate and business activities.  While the remaining family members all had roles in Moklam’s business operations, Patrick, a lawyer, was employed only as counsel to Moklam and the other Yu family entities. 
Continue Reading Son’s Lawsuit to Dissolve Family Business Based Upon Relatives’ “Vendetta” Against Him Allowed To Proceed