Court Opinion

ID: 9651458
Source: CourtListenerOpinion
Date Created: 2023-08-23 16:19:46.271878+00
Date Added: 2024-06-11T18:12:34.084342
License: Public Domain

MANDERINO, Justice
(dissenting).
I dissent. The majority’s interpretation of Section 311, subd. B of the Business Corporation Law has nullified the very purpose for that legislation: the protection of minority shareholders.
Section 311, subd. B prevents a corporation from selling all or substantially all of its property and assets without receiving the approval of shareholders by following a specified procedure. The majority holds that the procedure may be disregarded and that the alleged sale of all or substantially all of the corporation assets is valid. In this case, the failure to comply with the statutory procedure may not seem important since there are only a few shareholders and the real estate allegedly sold was the sole asset of the corporation. The holding of the majority, however, would be just as applicable to a large corporation whose assets are many and varied. The evaluation of corporation assets in many cases is a difficult and time consuming matter. Intangible as well as tangible corporate assets may be located in many parts of the state or many parts of the country. The assets may consist of real estate, machinery, equipment, inventory, accounts.receivable, and many other types of property which have value.
An evaluation by minority shareholders as to whether they will be harmed by the sale of the corporate assets may involve time consuming and complex considerations. *321The minority shareholders are entitled to a full opportunity to protest and to attempt to persuade other shareholders that the sale is not in the best interests of the shareholders.
In some corporations — maybe the one before us — a remedy against other shareholders may be totally inadequate if corporate assets worth $1,000,000 have been sold for $200,000. The minority shareholders may not have an adequate remedy unless the transaction is rescinded.
It might be argued that the minority shareholders are not entitled to rescission unless they can establish the inadequacy of the consideration and its unfairness to minority shareholders. This places what could be a considerable financial burden on minority shareholders whose statutory rights have been ignored. In some cases, thousands or millions of dollars might be necessary. On the other hand, the task of the minority shareholders would be much simpler at a corporate meeting of shareholders where an opportunity might exist to persuade other shareholders to disapprove the transaction.
It should make no difference whether the purchasers are bona fide purchasers or not. Those persons — majority shareholders — who conveyed title to the purchasers had no authority to convey the title. Under such circumstances, a bona fide purchaser for value does not acquire title.
The rights of minority shareholders in corporations should be treated in a manner similar to the rights of the public in matters involving municipal corporations. Minority shareholders frequently have no connection with the corporation or the majority shareholders except as investors. Indeed, many times they have never met the majority shareholders. The sale in this case should be as void as a sale of municipal assets by a municipal corporation would be in the absence of compliance with statutory procedures.
*322In this case, if the sale is rescinded, the purchasers may have a cause of action against the majority shareholders. In any event, the minority shareholders should not suffer.
In my opinion there was no need for the complaint against the purchasers to contain an allegation that the purchasers were not bona fide purchasers. Neither was it necessary for the complaint to allege that the transaction was not “the usual and regular course” of business. This should be a matter of defense. The complaint alleges that the sale took place without following statutory requirements. That is sufficient.
For these reasons, the order of the lower court dismissing the complaint of the plaintiff against the purchasers should be reversed.
NIX, J., joins in this dissenting opinion.