Irving Bank Corp. v. Bank of New York Co.

530 N.Y.S.2d 757 (1988)

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Irving Bank Corp. v. Bank of New York Co.

New York Supreme Court, New York County
530 N.Y.S.2d 757 (1988)

Facts

In late 1987, Bank of New York Company, Inc. (BNY) (defendant) sought to acquire all of the outstanding shares of Irving Bank Corporation (IBC) (plaintiff). IBC’s board of directors rejected all related efforts and offers of BNY, and a hostile takeover bid ensued. BNY’s takeover plan included acquiring at least a majority of IBC’s outstanding shares for consideration, including both cash and BNY shares. After the stock purchase, BNY hoped to merge IBC into BNY or a BNY affiliate. BNY had authority to issue additional shares under its certificate of incorporation, and BNY obtained majority approval of its shareholders for the acquisition of IBC’s outstanding shares. This BNY shareholder approval did not, however, include approval of a merger. IBC made motions for summary judgment or a preliminary injunction to prohibit BNY from executing its takeover plan without first obtaining the approval of two-thirds of BNY’s shareholders, as required at the time by New York Business Corporation Law (BCL) § 903. IBC alleged that BNY’s acquisition plan was effectively a merger and, under the de facto merger doctrine, had to be considered subject to the two-thirds-shareholder-approval requirement.

Rule of Law

Issue

Holding and Reasoning (Cahn, J.)

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