Symposium—Limited Liability Companies at 20
In 1975, the Massachusetts Supreme Judicial Court decided what has since become an iconic case of the law of closely held corporations, Donahue v. Rodd Electrotype Company of New England, Inc. The company, Rodd Electrotype, had been founded by two men. One had died, leaving his stock essentially to his widow. The other founder, getting on in years, sought to have the company buy out his holding to the ultimate advantage of his adult children. Not surprisingly, the widow of the deceased founder saw no reason why company money should redeem the stock of one founder while leaving her to take whatever fate (or that founder’s children) might have in store for her.
She sued, and the Supreme Judicial Court ruled in her favor. In doing so, the court made a historic characterization and announced a rule of law that have together remained at the core of the law of closely held corporations for more than thirty years . . . .