A close corporation is a private company that has:
- (1) a small number of stockholders;
- (2) no ready market for the corporate stock; and
- (3) substantial majority stockholder participation in the management, direction and operations of the corporation.
There is no single, generally accepted definition. Some commentators emphasize an "integration of ownership and management." Others focus on the number of stockholders and the nature of the market for the stock. In this view, close corporations have few stockholders; there is little market for corporate stock. The Supreme Court of Illinois adopted this latter view in Galler v. Galler, 32 Ill. 2d 16 (1965): "For our purposes, a close corporation is one in which the stock is held in a few hands, or in a few families, and wherein it is not at all, or only rarely, dealt in by buying or selling." Id. at 27.
- Donahue v. Rodd Electrotype Co., 367 Mass. 578 (1975).
- (Note, Statutory Assistance for Closely Held Corporations, 71 Harv. L. Rev. 1498 ), in which the stockholders occupy most management positions. Kruger v. Gerth, 16 N. Y. 2d 802, 806 (1965) (Fuld, J., dissenting). Forward, 18 Law & Contemp. Prob. 433 (1953). See Helms v. Duckworth, 249 F. 2d 482, 486 (D. C. Cir. 1957).
- Accord, Brooks v. Willcuts, 78 F. 2d 270, 273 (8th Cir. 1935). See, generally, F. H. O'Neal, Close Corporations: Law and Practice, § 1.02 (1971).