## Facts

- Ajax Electric Motor Corp. was a closely held corporation whose shares were held largely by family members, including siblings Deborah Ronnen and Neil Norry, who together (with their children) held a bare majority.
- In 1982, Norry, his sons, and Ronnen (individually and as custodian for her children) executed a shareholder voting agreement reallocating voting authority.
- The agreement gave Norry proxy authority to vote Ronnen’s and her children’s shares on matters relating to Ajax’s day-to-day operations and corporate management, and on any proposed sale of all or substantially all corporate assets, while reserving other major corporate-policy votes to Ronnen.
- The agreement also provided for shareholder voting to secure Ronnen a board seat, ensure her access to management reports, and cap Norry’s executive compensation at $125,000 per year.
- At the March 13, 1995 annual shareholders’ meeting, Ronnen served Norry with a temporary restraining order barring him from voting her shares on proposed amendments to the bylaws and certificate of incorporation, which were on the agenda.
- The meeting began contentiously; Ronnen arranged for videotaping of the proceedings without prior notice to Norry.
- Norry announced an adjournment of the meeting and, over objection, voted both his shares and Ronnen’s shares (pursuant to the agreement) to obtain a majority vote to adjourn, then left.
- After Norry left, Ronnen and aligned shareholders proceeded to elect a slate of directors.

## Issues

1. Whether the 1982 shareholder voting agreement allocating extensive voting authority to one shareholder in a close corporation was valid and enforceable under New York law.
2. Whether the agreement authorized Norry to vote Ronnen’s shares to adjourn the March 13, 1995 shareholders’ meeting, notwithstanding the temporary restraining order limited to certain agenda items.
3. Whether a director election conducted after a valid adjournment was legally effective, or subject to invalidation and a court-ordered new election under Business Corporation Law § 619.

## Decision

- The Court of Appeals held the 1982 shareholder voting agreement was valid and enforceable as a close-corporation governance arrangement.
- The Court held the agreement authorized Norry to vote Ronnen’s shares on the question of adjournment as a matter relating to day-to-day operations and corporate management.
- The Court held the temporary restraining order barred voting Ronnen’s shares only on the specified charter and bylaw amendments, not on adjournment.
- The Court held the adjournment vote was valid; therefore, the meeting was no longer in session and actions taken afterward were not a valid continuation of the meeting.
- The Court invalidated the post-adjournment director election and affirmed the order directing a new election under BCL § 619.

## Legal Principles

- Shareholders of a close corporation may enter enforceable voting agreements that allocate voting power and management control, so long as the arrangement does not contravene mandatory statutory requirements or public policy.
- Courts interpret voting agreements according to their terms; where an agreement grants proxy voting authority over corporate management matters, it can include procedural control of a shareholders’ meeting such as adjournment.
- A restraining order limited to specific voting subjects does not bar voting on separate matters outside its scope.
- Once a shareholders’ meeting is validly adjourned, shareholders cannot validly conduct corporate business as though the meeting remained in session.
- Under BCL § 619, courts may invalidate defective corporate elections and order a new election to restore lawful corporate governance.

## Conclusion

The Court of Appeals enforced a close-corporation shareholder voting agreement, upheld the validity of an adjournment effected through contractually authorized proxy voting, and set aside a director election conducted after the adjournment, affirming a new election as proper relief under Business Corporation Law § 619.


Ronnen v. Ajax Electric Motor Corp., 88 N.Y.2d 582 (N.Y. 1996)