Two attorney-shareholders in Ched Realty sought to buy out the shares of two recently deceased shareholders in
Question:
Two attorney-shareholders in Ched Realty sought to buy out the shares of two recently deceased shareholders in the company. The attorneys cited a clause in a shareholder agreement that allowed them to buy the shares at “book value or $200 per share, whichever was greater.” At the time, the book value of the shares was negative, as the assets of the longstanding corporation had been depreciated to nothing. However, the market value of the shares was well over $40,000 per share. The estates of the two deceased shareholders sued to block the sale for $200 per share claiming that the deceased shareholders were not fully aware of what they were signing because they were older and had not completed high school. The lower court disallowed the shareholder agreement. The two attorneys appealed. Should the appeals court overturn the lower court’s ruling? Why or why not? (Rosiny v. Schmidt, 587 N.Y.S.2d 929)
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