Sale of Assets. Mike and Peter Schwadel were major shareholders in HJU Sales & Investments, Inc Over several years the assets of the corporation had been sold off until only one asset remained—a restaurant called "The Place for Steak." The Schwadels

Question

sued the president and third major shareholder of the corporation, Hy Uchitel, when he entered into a contract to sell this remaining asset. Florida state law prohibits the sale of all or substantially all of a corporation's assets without shareholder approval. The Schwadels sought an injunction to prevent the sale of the restaurant. Will the court grant the injunction?

Answer 1

Sale of assets
Yes, the court granted the injunction. The court noted that the fundamental purpose in forming and operating HJU Sales & Investments, Inc., "was, and continues to be, to engage in the restaurant business. Thus, the sale of The Place for Steak constitutes a sale of ‘substantially all' the corporate assets and is subject to the statutory rights and protections extended to stockholders under Florida's shareholder ‘consent' provisions governing such transactions." The purpose of the consent provision, the court stated, was "to protect the shareholders from . . . the destruction of the means to accomplish the purposes or objects for which the corporation was incorporated and actually performs." The court concluded that when Uchitel entered into the transaction to sell the restaurant, "he violated shareholders' statutory rights to receive prior notice to consider the transaction and effectively barred their participation in a decision which fundamentally changes the nature of the corporation." Considering the appropriateness of the injunction, the court stated that Uchitel's proposed sale constituted a breach of his fiduciary duties. The court concluded that legal remedies would be "inadequate to prevent the irreparable harm that would result from Uchitel's unilateral decision. . . . [D]amages would not compensate the shareholders for the destruction of the corporation caused by the transfer of the last major corporate asset."