Disputes over closely held family corporations frequently arise when ownership of corporate stock is transferred informally within a family. While a parent may intend to make a lifetime, or inter vivos, gift of corporate shares to a child, courts generally require more than evidence of donative intent alone. The transfer must also be accompanied by proof that the gift was completed in accordance with governing corporate law and the corporation’s own stock-transfer requirement

Under Section 706(a) of the New York Business Corporation Law (“BCL”), a director may be removed for cause either by shareholder vote or, where authorized by shareholder-adopted bylaws, by action of the board. In addition, where a corporation’s governing bylaws leave “cause” undefined, the board retains broad discretion to determine whether sufficient grounds for removal exist, subject to the business judgment rule.

If a contracting party intends for the obligations under a contract to be executed by a business entity, it is critical that the person executing the contract on behalf of the entity clearly indicate that the contract is being signed in a representative capacity. This point was recently reiterated in James E. Cayne v. Alexandra Lebenthal , (Sup. Ct. New York Co. October 30, 2017) (the “Action”). The Defendant in Cayne is Alexandra Lebenthal, CEO of Lebenthal Holdings, LLC