In 1942, X corporation and its stockholders entered into an agreement whereby it was stipulated that the management of all theatres leased or operated by the X corporation, or any subsidiary thereof, would be placed in the hands of Y corporation, a large stockholder. This power of management was to include supervising and directing the buying and booking of all attractions, designating and changing the entertainment policy, hiring and discharging employees, and carrying out "such policies or projects as the Board of Directors of the Tenant or its subsidiaries may approve." This agreement was to be effective for a period of nineteen years and was a renewal of a like contract which had been in force for the preceding twenty years. Plaintiff stockholder instituted this action to enjoin defendant Y corporation from continuing the management of X corporation's theatres under this contract. The lower court dismissed the case as no actual injury could be shown nor was any fraud alleged. Held, reversed. The agreement violated the New York statute, which provides: "The business of a corporation shall be managed by its board of directors." Long Park, Inc. v. Trenton-New Brunswick Theatres Co., (N.Y. 1948) 77 N.E. (2d) 633.
Bernard L. Trott,
CORPORATIONS-APPLICATION OF STATUTES REQUIRING THAT CORPORATE BUSINESS BE MANAGED BY BOARD OF DIRECTORS,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol47/iss1/17