New York Consolidated Laws

N.Y. Business Corporation Law § 1507 (2026)

Issuance of shares

✓ current as of May 2026

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§ 1507. Issuance of shares.
  (a) A professional service corporation may issue shares only to
individuals who are authorized by law to practice in this state a
profession which such corporation is authorized to practice and who are
or have been engaged in the practice of such profession in such
corporation or a predecessor entity, or who will engage in the practice
of such profession in such corporation within thirty days of the date
such shares are issued. No shareholder of a professional service
corporation shall enter into a voting trust agreement, proxy, or any
other type agreement vesting in another person, other than another
shareholder of the same corporation or a person who would be eligible to
become a shareholder if employed by the corporation, the authority to
exercise voting power of any or all of his shares. All shares issued,
agreements made, or proxies granted in violation of this section shall
be void.
  (b) A design professional service corporation may issue shares to
individuals who are authorized by law to practice in this state a
profession which such corporation is authorized to practice and who are
or have been engaged in the practice of such profession in such
corporation or a predecessor entity, or who will engage in the practice
of such profession in such corporation within thirty days of the date
such shares are issued. A design professional service corporation may
also issue shares to employee stock ownership plans (ESOPs) and
employees of the corporation not licensed as design professionals,
provided that:
  (i) greater than seventy-five percent of the outstanding shares of
stock of the corporation are owned by design professionals and an ESOP
(or ESOPs) with greater than seventy-five percent of the plan's voting
trustees or greater than seventy-five percent of the plan's committee
members being design professionals,
  (ii) an ESOP, either in part or in its entirety, shall not constitute
part of the greater than seventy-five percent owned by design
professionals unless greater than seventy-five percent of the plan's
voting trustees or greater than seventy-five percent of the plan's
committee members are design professionals,
  (iii) greater than seventy-five percent of the directors are design
professionals,
  (iv) greater than seventy-five percent of the officers are design
professionals,
  (v) the president, the chairperson of the board of directors and the
chief executive officer or officers are design professionals, and
  (vi) the single largest shareholder is either a design professional or
an ESOP with greater than seventy-five percent of the plan's voting
trustees being design professionals and greater than seventy-five
percent of the plan's committee members being design professionals.
  No shareholder of a design professional service corporation shall
enter into a voting trust agreement, proxy or any other type of
agreement vesting in another person, other than another shareholder of
the same corporation, the authority to exercise voting power of any or
all of his or her shares. All shares issued, agreements made or proxies
granted in violation of this section shall be void.
  (c) Any firm established for the business purpose of incorporating as
a professional service corporation pursuant to paragraph (h) of section
fifteen hundred three of this article may issue shares to individuals
who are authorized by law to practice in this state the profession which
such corporation is authorized to practice or who will engage in the
practice of such profession in such corporation within thirty days of
the date such shares are issued and may also issue shares to employees
of the corporation not licensed as certified public accountants,
provided that:
  (i) at least a simple majority of the outstanding shares of stock of
the corporation are owned by certified public accountants,
  (ii) at least a simple majority of the directors are certified public
accountants,
  (iii) at least a simple majority of the officers are certified public
accountants,
  (iv) the president, the chairperson of the board of directors and the
chief executive officer or officers are certified public accountants. No
shareholder of a professional service corporation established pursuant
to paragraph (h) of section fifteen hundred three of this article shall
enter into a voting trust agreement, proxy or any other type of
agreement vesting in another person, the authority to exercise voting
power of any or all of his or her shares. All agreements made or proxies
granted in violation of this section shall be void.

Notes of Decisions

Cited in 31 cases (2 in the last 5 years), 1995–2025 · leading case: Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 2017 NY Slip Op 2614 (N.Y. App. Div. 2017).

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Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 2017 NY Slip Op 2614 (N.Y. App. Div. 2017). · cites it 6× “The insurers additionally contended that the plaintiff was not entitled to payment because Carothers did not personally engage in the practice of medicine within the professional corporation, as required by Business Corporation Law § 1507. Sher and Vayman were both deposed prior…”

State Farm Mut. Auto. Ins. v. Mallela, 827 N.E.2d 758 (NY 2005). · cites it 2× “The Second Circuit then certified to this Court the question whether “a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507 , 1508, and N.”

Andrew Carothers, M.D., P.C. v. Progressive Ins., 42 Misc. 3d 30 (N.Y. App. Term. 2013). · cites it 5× “Carothers was engaged in the practice of medicine in ACMDPC, within the meaning of Business Corporation Law § 1507, during the time ACMDPC was in business.”

Carothers v. Ins. Companies, 26 Misc. 3d 448 (N.Y. City Civ. Ct. 2009). · cites it 12× “First, defendants maintained that plaintiff operated in violation of Business Corporation Law §§ 1507 and 1508 in that Hillel Sher and Irina Vayman, neither of whom was a licensed physician, actually owned and controlled the corporation.”

Allstate Ins. v. Elzanaty, 916 F. Supp. 2d 273 (E.D.N.Y 2013). “Public Health law. Article 28 and its corresponding regulations govern the formation and operation of hospitals in New York.”

Matter of Soames v. 2LS Consulting Eng'g, D.P.C., 2020 NY Slip Op 05607 (N.Y. App. Div. 2020). “Plaintiff here only reiterates that the amount to be received by him, a nondesign professional, would represent more than his statutorily allotted share of 2LS, and would thus violate Business Corporation Law § 1507(b)'s requirement that a design professional own more than 75%…”

Metroscan Imaging, P.C. v. GEICO Ins., 13 Misc. 3d 35 (N.Y. App. Term. 2006). · cites it 6× “* In Mallela , the New York Court of Appeals was asked the following certified question by the United States Court of Appeals, Second Circuit: “Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507 , 1508 and N.”

Metroscan Imaging P.C. v. GEICO Ins., 8 Misc. 3d 829 (N.Y. City Civ. Ct. 2005). · cites it 2× “) The Court of Appeals of the State of New York had no such reluctance when responding affirmatively to the certified question posited by the Second Circuit, that is, whether “ ‘a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507…”

State Farm Mut. Auto. Ins. v. Mallela, 372 F.3d 500 (2d Cir. 2004). · cites it 2× “Accordingly we deem it appropriate to CERTIFY the following question to the New York Court of Appeals: 1) Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507 , 1508, and N.”

Liberty Mut. Ins. v. Raia Med. Health, P.C., 140 A.D.3d 1029 (N.Y. App. Div. 2016). “, 54 AD3d 738, 740 [2008]), and provides that a professional service corporation may issue shares only to individuals, inter alia, “who are or have been engaged in the practice of such profession in such corporation or a predecessor entity” (Business Corporation Law § 1507 [a]).…”

H & H Chiropractic Servs., P.C. v. Metro. Prop. & Cas. Ins., 47 Misc. 3d 1075 (N.Y. City Civ. Ct. 2015). · cites it 3× “v Mallela ( 4 NY3d 313 [2005]), the Court of Appeals upheld the Insurance Department’s regulation and held that a medical corporation that was fraudulently incorporated under Business Corporation Law §§ 1507 and 1508, and Education Law § 6507 (4) (c) is not entitled to be…”

Carothers v. Ins. Companies, 13 Misc. 3d 970 (N.Y. City Civ. Ct. 2006). · cites it 2× “The only question the Mallela court agreed to answer was whether “ ‘a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507 , 1508, and N.”

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— N.Y. Business Corporation Law § 1507(b) — 1 case

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