Legal Question in Business Law in New York
2 shareholders of a 3 shareholder corp want to open 2nd location with same name.
3 men own an incorporated restaurant. (very popular, open 30 years) 2 of them want to open a second location with the same name. Can they use the name without the 3rd brother's permission? Will they have to pay him something?
2 Answers from Attorneys
Re: 2 shareholders of a 3 shareholder corp want to open 2nd location with same name.
This is a question that is usually answered by reviewing the corporate bylaws. If there is nothing specific, then a resolution should be voted on. What they cannot do, is act in a manner adverse to the interests of the corporation, because then, they would be liable for breaching their fiduciary duties. In a nutshell, yes they would have to pay over some of the profits.
Re: 2 shareholders of a 3 shareholder corp want to open 2nd location with same name.
Interesting.
First, the name is not owned by any one individual, it is owned by the corporation. So, if a new corporation (or business entity) wants to use the name, it would have to ask for consent from the first corporation - especially if the name is unique.
Second, each owner owes a fiduciary duty to the corporation. An owner cannot seek self interest at the expense of the corporation. Therefore the issue is whether the new restaurant will adversely affect the original restaurant.
Third, as a corporation - and depending on the language in the shareholder agreement and corporate bylaws - decisions are made by majority vote.
Therefore, to answer your question, you first have to determine if there is an adverse affect on the first restaurant by opening a second restaurant. If yes, I believe you would have to receive consent from the third shareholder. If there is no reason to believe that there will be an adverse affect (ex. 1 restaurant in NY and the other in CA), there should be a corporate vote as to use of the name by the second restaurant.
Mike.
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