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Ask a Lawyer -- Corporations
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Brought to you by MedLawPlus.com®-- Corporate Bylaws and initial board of directors resolution Price: $14.99 (free trial) |
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Question: I own 4% of the shares in a S-Corp. I want to sell my interest in the company and I am not sure where to start or what type of a lawyer should I look for to help me. According to our bylaws I must first offer the sale to current shareholders first. I did this with certified mail last year giving them 120 days to respond before I offer it to someone outside. I still have not received any word from the current shareholders. Response: An attorney experienced in corporate law would need to review all pertinent documents to give you an opinion on the matter, however, I can make a few general comments based upon what you have provided. What you are describing is a shareholder buy-sell agreement. Broadly stated, such agreements limit the ability of shareholders to freely sell their shares. A right of first refusal to other shareholders or the corporation is a common provision of such agreements. Although the corporation's bylaws (document passed by the board of directors) may refer to a shareholder buy-sell agreement, I'd be surprised if there did not exist a contract signed by all the shareholders detailing the provisions of the buy-sell. Analysis of the issue starts with this document. If you believe you have complied with all necessary requirements of the shareholder buy-sell agreement entitling you to sell the shares to outside parties, I'd first write to the majority shareholder (plus all other shareholders if the group is small) indicating your intention to sell the shares to an outside party and specifically ask the majority shareholder whether he / she will make an objection to your sale based upon the buy-sell agreement. Best to know whether the other shareholders are going to object before you hire a lawyer to deal with a problem that might not exist. Some buy-sell agreements have a provision forcing the corporation or other shareholders to purchase the shares of a withdrawing shareholder. If you think your contract may have such a provision, I would take it to a local attorney experienced in corporate law to review the document. Submitted: 6-27-2006; Jerry, WI Response: 6-28-2006; JJR Add A Comment |
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