The Best Defense is a Good Offense - Forced Corporate Buy-Outs under BCL 1118


Sometimes the best defense is a good offense. Or that's how one could view the forced buy-out option for shareholders under BCL 1118.

While the Business Corporation Law gives holders of 20 percent or more of the outstanding voting shares of a close corporation the right to petition for judicial dissolution, under BCL § 1118(a), such a petition triggers the right of any other shareholder or the corporation" to "elect to purchase the shares owned by the petitioners at their fair value."

A BCL §1118 purchase election is the definitive remedy since it “permits the continuation of the corporation's existence." Matter of Chu v. Sino Chemists, 192 A.D.2d 315, 595 N.Y.S.2d 465 (1st Dep’t 1993); Matter of Smith v. Russo, 230 A.D.2d 863, 646 N.Y.S.2d 711 (2d Dep’t 1996). The statute provides the non-petitioning shareholders with “an absolute right to avoid the dissolution proceedings and any possibility of the company's liquidation by electing to purchase petitioner's shares at their fair value and upon terms and conditions approved by the court.” Matter of Pace Photographers, 71 N.Y.2d 737, 525 N.E.2d 713, 530 N.Y.S.2d 67 (1988).

After election under BCL §1118 a Court’s sole task remaining is valuation under 1118, not liquidation under 1104-a.

For more information, please contact Judith Bachman, Esq. at The Bachman Law Firm PLLC at judith@thebachmanlawfirm.com or 8456393210.

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The Bachman Law Firm PLLC helps business clients with matters including lawsuits, collections, real estate, contracts, corporate issues, and trademarks and copyrights. With offices in New City, the firm serves clients in New York and New Jersey including those in Manhattan, Bronx, Queens, Brooklyn, and Rockland, Westchester, and Bergen. 

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