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Legislative updates

Senate Bill 4278/Assembly Bill 6330, enacted the “Women on Corporate Boards Study” law. This law, which is effective June 27, 2020, requires the New York Department of State and the Department of Taxation and Finance to conduct a study on the number of women directors who serve on each board of directors of domestic corporations and foreign corporations authorized to do business in New York.
Senate Bill 8412, effective June 17, 2020 and for the time periods specified therein, amends the business corporation law regarding director consents to action without a meeting; and amends the business corporation and nonprofit corporation laws regarding shareholder and member meetings, respectively.
Executive Order 202.18 suspends a provision in the Not-for-Profit Corporation Law to allow annual meetings of members to be conducted remotely.
Senate Bill 7508 (See Part R), effective April 3, 2020 and deemed to be in effect on and after March 31, 2020, amends the Executive Law by extending authorization for the Department of State to provide multiple levels of expedited service.
Executive Order No. 202.8, effective March 20, 2020 until April 19, 2020, suspends Section 602(a) and Section 605(a) and (b) of Section 605 of the Business Corporation Law to the extent they require meetings of shareholders to be noticed and held at a physical location.
Executive Order 10 2020 (No. 202.5), issued and effective March 18, 2020 through April 17, 2020, suspends the effectiveness of section 708(b) of the Business Corporation Law to the extent necessary to permit business corporations to take any action otherwise permitted under that section with the electronic consent of the members of the board of directors or committee thereof under conditions prescribed in the Order.

Case summaries

Fiduciary Duty
Celauro v. 4C Foods Corporation, 2020 NY Slip Op 05716, decided October 14, 2020. The New York Court of Appeals, Appellate Division held that majority shareholders in a closely held corporation with feuding shareholders did not breach their fiduciary duty to the minority shareholder by declining to consent to a transfer of stock that would have given him enough stock to seek judicial dissolution of the corporation. The majority was acting to protect the corporation’s day to day operations.
Expulsion of Member
Garcia v. Garcia, 2020 NY Slip Op 05725, decided October 14, 2020. The New York Court of Appeals, Appellate Division held that the expulsion of a member by the vote of 2 of the LLC’s 3 members was proper where the LLC’s operating agreement established that members could be expelled and required a majority vote to take any action on behalf of the LLC.
LLC – Fiduciary Duty
McKinnon Doxsee Agency, Inc. v. Gallina, 2020 NY Slip Op 05499, decided October 7, 2020. The New York Supreme Court, Appellate Division held that the defendant, a member of an LLC’s board of directors, and employee of the LLC’s controlling member, owed a fiduciary duty to the LLC, which he breached by copying the controlling member’s customer files and soliciting their clients before resigning as a director and leaving his job.
Member’s Authority to Act
Favourite Limited v. Cico, 2020 NY Slip Op 01463, decided March 3, 2020. The New York Supreme Court, Appellate Division held that a Delaware LLC whose certificate of formation was cancelled lacked standing or capacity to commence a lawsuit. A member claimed to have obtained a certificate of revival. However, the operating agreement provided that no member had a right to bind the LLC and no member acting solely had authority to act on the LLC’s behalf. Therefore the certificate of revival was unauthorized.
Transfer of Membership Interest
Behrend v. New Windsor Group, LLC, 2020 NY Slip Op 00841, decided February 5, 2020. The New York Supreme Court, Appellate Division held that even if the plaintiff purchased the 50% interest in a New York LLC – which the defendant disputed – it would not make him a member because the other members did not consent to his becoming a member as required by the operating agreement.

Other notices

There are no new notices at this time.