Galler v. Galler

  1. [changes jurisprudence for close corporations, very important, but a little complicated] two brothers, Isadore and Benjamin had wanted to set up their corporation to protect their wives if either of them died; both were directors, officers, and shareholders; a bit of a problem here is that only the Galler brothers were parties to the agreement, there was a third director who was not party. They were not acting in their director or officers roles, because they had not called a board meeting.
  2. permissible provisions in the agreement: creating and amending bylaws, naming specific people to be voted into the board, [probably ok] to pre-nominate wife as replacement for director; but, not ok, for shareholder agreement to [because they start to impinge on the authority of the directors]: decide payment of dividends, setting salaries of officers
  3. take each provision, look how it normally occurs in corporate law, and if it generally upsets the balance - the closer the agreement gets to invalidating the norms then the more likely it is that it will be void. But the court here decides that the agreement is enforceable!
  4. shareholders can make arrangements for the management of a close corporation, if: it was agreeable to all the shareholders, and there was no fraud or injury to creditors or the public [why? because no easy exit from closely-held corporation, and shareholders of a close corporation usually depend on it for their livelihood]
    1. but: must authorize in articles of corporation, and have statement in articles that "this is a close corporation"
  5. McQuade holds true for publicly traded companies