## Facts

- A closely held corporation was formed to own and manage a New York City building primarily occupied by its shareholder-tenants.
- The initial shareholders executed an agreement providing that rent per square foot for the shareholder-tenants would be set equally among them, while rent for outside tenants would be set by corporate officers.
- For many years, the shareholder-tenants paid below-market rent, producing little or no corporate profit.
- One minority shareholder ceased being a tenant, and another minority owner held shares after selling his related business interest; both no longer benefited from the low-rent arrangement.
- The majority owners remained tenant-shareholders, continued paying below-market rent, and controlled corporate decisions.
- The minority demanded that the majority pay market rent, dissolve and sell the building, or buy out the minority shares; the majority refused.
- The minority also complained of irregularities in corporate governance, including failure to hold formal shareholder meetings.

## Issues

1. Whether minority shareholders stated grounds for judicial dissolution under N.Y. Business Corporation Law § 1104(c) based on the majority’s continuation of a longstanding low-rent arrangement that reduced corporate profits and allegedly disadvantaged non-tenant minority shareholders.
2. Whether the majority’s conduct and alleged governance irregularities amounted to oppression, mismanagement, or fiduciary breach warranting dissolution rather than other remedies.

## Decision

- The Court of Appeals affirmed dismissal of the dissolution petition.
- The court held the minority did not establish statutory grounds for dissolution under BCL § 1104(c).
- Continuation of the rent arrangement did not constitute actionable oppression where it was contemplated by the shareholders’ original agreement and consistent with the corporation’s purpose.
- The absence of formal shareholder meetings, without more, did not justify dissolution.
- The court indicated that any viable challenge should proceed through less drastic remedies, such as a derivative action attacking the agreement’s enforceability.

## Legal Principles

- Judicial dissolution under BCL § 1104(c) requires more than minority dissatisfaction with the economic consequences of an original shareholder bargain.
- Conduct consistent with the corporation’s founding purpose and an existing shareholder agreement is generally insufficient, by itself, to show oppression or that the business cannot be conducted to the advantage of shareholders generally.
- Dissolution is an extraordinary remedy; courts favor less drastic alternatives when available.
- Procedural governance lapses (e.g., failure to hold formal meetings) do not automatically warrant dissolution absent stronger statutory grounds.

## Conclusion

The court refused to dissolve the corporation because the complained-of low-rent policy reflected the original shareholder agreement and corporate purpose, and the minority’s loss of benefit stemmed from its changed tenant status rather than statutory oppression or mismanagement under BCL § 1104(c).


Matter of Nelkin v. H.J.R. Realty Corp., 25 N.Y.2d 543, 255 N.E.2d 713 (1969)