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Business Associations Keyed to Diamond, 6th Ed.
Leader v. Hycor, Inc.
Citation:
479 N.E.2d 173 (1985)Facts
Hycor, Inc. was a Massachusetts corporation organized in 1967 by five individuals who served as directors and employees. The corporation specialized in scientific research and development in military defense. In 1969, Hycor made a public offering of 75,000 shares at $4 per share. By 1980, the majority shareholders and their families owned approximately 81% of the outstanding shares. In February 1980, the majority shareholders proposed a recapitalization plan to reduce the authorized capital from 2 million shares with a par value of one cent to 500 shares with a par value of forty dollars, effectively creating a 1:4,000 reverse stock split. The plan eliminated fractional shares, requiring minority shareholders to accept $5 per share. The plaintiffs objected to the plan and voted against it, but the majority approved it. The plaintiffs then sued, alleging fraud, breach of fiduciary duty, and improper notice. The trial judge ruled that the recapitalization had a legitimate business purpose and that the $5 per share price was fair and reasonable.
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