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Business Associations Keyed to Diamond, 6th Ed.
Baker v. MacFadden Publications, Inc.
Citation:
300 N.Y. 325, 90 N.E.2d 876 (1950)Facts
Louis Baker and other minority shareholders of MacFadden Publications, Inc. initiated a derivative action on behalf of the corporation against past directors and officers for alleged misapplication of funds and waste of corporate property. The plaintiffs collectively owned only about 0.004% of the corporation’s stock, with a market value of approximately $350. Under Section 61-b of the General Corporation Law, the corporation moved for security for expenses since the plaintiffs did not meet the statutory threshold of 5% ownership or $50,000 in share value. Special Term ordered the plaintiffs to post $40,000 security but allowed them to vacate this requirement if additional stockholders joined to meet the statutory threshold. The plaintiffs also sought to inspect the corporation’s stock book to solicit additional shareholders to join the action. The Appellate Division modified the security order by removing the provision allowing joinder of additional stockholders and denied the plaintiffs’ petition to inspect the stock book.
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