Corporate Shareholder Agreement Governance-Override Requirements in New York

At a glance

Requirements one by one

The override belongs in the certificate

New York's broad route is not a separate omnibus contract. It is a certificate- of-incorporation provision that would otherwise be prohibited because it restricts the board's management authority or transfers some or all of that authority to shareholders or selected persons or corporations (N.Y. Bus. Corp. Law § 620(b)).

Every incorporator or every record holder of every outstanding share must authorize the provision, whether or not a share has voting power. Afterward, shares may be transferred or issued only to persons with knowledge or notice of the provision or who consent in writing (N.Y. Bus. Corp. Law § 620(b)(1)-(2)).

Amendment and public-market termination

The vote to strike the provision depends on the corporation's statutory timing branch and certificate. Section 620(d) uses a two-thirds legacy branch and a majority branch for specified corporations, permits a greater certificate threshold, and allows a certificate amendment to set a future strike threshold that cannot fall below a majority (N.Y. Bus. Corp. Law § 620(d)).

The provision is valid only while no shares are listed on a national securities exchange or regularly quoted in the specified over-the-counter market. Once it has ceased to be valid, the board may authorize a certificate amendment striking it and stating the event that ended its validity (N.Y. Bus. Corp. Law § 620(c),(e)).

Certificate notice and managerial liability

Every share certificate must conspicuously note that the certificate of incorporation contains the board-control provision. Section 620 states no certificate-recall procedure, uncertificated information-statement rule, or purchaser rescission clock for this route (N.Y. Bus. Corp. Law § 620(g)).

To the extent the provision controls board discretion or powers, directors are relieved and the shareholders who authorized or consented to the provision assume the managerial-act-or-omission liability that the Business Corporation Law imposes on directors (N.Y. Bus. Corp. Law § 620(f)).

What trips people up

Section 620(a)'s written, signed agreement between two or more shareholders is a voting agreement. It does not itself receive paragraph (b)'s broad authority to restrict or transfer board management. The governance override must be in the certificate and satisfy paragraph (b)'s all-incorporator or all-outstanding- share authorization rule.

The later-holder rule is also a condition on every subsequent transfer or issuance, not a rescission remedy. New York requires knowledge, notice, or written consent but does not state the Model Act's 90-day-after-discovery or two-year-after-purchase action period in Section 620.

Common questions

Can New York bylaws carry the Section 620(b) governance override?

Not under the text of this route. Paragraph (b) requires the provision in the certificate of incorporation or an amendment to it. A bylaw or separate agreement may raise other questions but does not become the paragraph (b) certificate provision.

Do nonvoting shares count when the provision is first adopted?

Yes. Section 620(b)(1) requires authorization by all holders of record of all outstanding shares “whether or not having voting power,” unless the provision is authorized initially by all incorporators.

Does New York provide a fixed duration for the provision?

No fixed number of years appears in Section 620. Its statutory validity instead depends on the corporation remaining outside the national-listing and specified over-the-counter quotation conditions in paragraph (c).

Statutes and sources

• N.Y. Bus. Corp. Law § 620(b)-(c) — certificate route, board-control scope, unanimous incorporator or all-share authorization, later-recipient knowledge or consent, and public-market cutoff. Official NYSenate text, accessed August 27, 2026.
• N.Y. Bus. Corp. Law § 620(d)-(g) — strike-amendment thresholds, board cleanup after invalidity, managerial-liability shift, and conspicuous share- certificate notice. Official NYSenate text, accessed August 27, 2026.