Shareholder Expulsion Provision Applied

On October 29, 2013, Justice Kornreich of the New York County Commercial Division issued a decision in Christou v. Koureli Rest. Group, Inc., 2013 NY Slip Op. 32743(U), denying a motion for a preliminary injunction by plaintiffs to enjoin the other shareholders of a private company from reducing their shares to zero pursuant to the shareholder agreement which enumerated certain occurrences which would justify such a expulsion.

Justice Kornreich denied the motion because she found that an occurrence for expulsion had been satisfied. Specifically, the plaintiffs had failed to properly supervise the build out of the restaurant owned by the corporation. The case is noteworthy because it illustrates how a properly drafted shareholders agreement will be enforced even when it results in two shareholders being stripped of their shares.