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Zion v. Kurtz - 50 N.Y.2d 92, 428 N.Y.S.2d 199, 405 N.E.2d 681 (1980)

Rule:

When all of the stockholders of a Delaware corporation agree that, except as specified in their agreement, no "business or activities" of the corporation shall be conducted without the consent of a minority stockholder, the agreement is, as between the original parties to it, enforceable even though all formal steps required by statute have not been taken. 

Facts:

Plaintiffs Abraham Zion and others, filed an action for declaratory and injunctive relief, asking that interest and escrow agreements executed without Zion’s consent be declared in violation of the stockholders' agreement and annulled, and that the formation of subsidiaries be declared in violation of the agreement and that they be dissolved. 

Issue:

Were the interest and escrow agreements executed without Zion's consent be declared in violation of the stockholders' agreement?

Answer:

Yes

Conclusion:

The court held that when all of the stockholders of a corporation agree that no business or activities of the corporation shall be conducted without the consent of a minority stockholder, the agreement is, as between the original parties to it, enforceable even though all formal steps required by the statute have not been taken. The agreement made by the defendants was violated when the corporation entered into two agreements without Zion’s consent but was not violated by the formation of two subsidiaries, the minority stockholder's consent having been obtained.

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