As New York Business Divorce reports today, the lack of a shareholder agreement caused a New York widow of a dentist, who was practicing dentistry in a professional corporation, to be left with nothing.
Despite the fact that the deceased dentist was a 75% shareholder in the dentist professional corporation and his widow had found a dentist purchaser for the dentist practice offering $530,000, the minority dentist shareholder was able to defeat her and will likely be able to force her to sell her late husband's share in the business for $0.
The reason for all this was the fact that shareholders of professional corporations must all be licensed to exercise the profession of the corporation, in this case dentistry. If one dentist dies, his non dentist heirs, here the widow, are severely limited in their rights to exercise rights of a shareholder.
However, all of this could have been prevented by a properly drafted shareholder agreement including provisions dealing with the death of any shareholder and his heirs' rights. The shareholder agreement would have preempted the New York default provisions contained in the business corporation law. These default provisions caused the widow's dilemma.