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Ask a Lawyer -- Corporations
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Question: PARTNER (45%) IN A S-CORP DIES. WIDOW FILES BANKRUPTCY 2 WEEKS LATER. WE GET A LETTER FROM A LAWYER DEMANDING TAX RECORDS, BANK STATEMENTS, CANCELED CHECKS, P&L STATEMENT. WE ARE A SMALL (PROFIT $10k this year) COMPANY. HE IS ALSO INSISTING WE BUY HER STOCK. WHAT DO WE HAVE TO DO? DO WE HAVE TO PROVIDE INFORMATION? WE DO NOT HAVE SOME OF THE RECORDS, HE DID (dead partner). Response: First suggestion: do not type messages in all-caps. It's considered rude. Caps in internet speak is equivalent to shouting. I, for one, do not appreciate being shouted at. Do you have to give the attorney the records? I'd give the attorney all the records in your possession that he seeks. Do you have to? Assuming the attorney either represents the bankruptcy trustee or the debtor (i.e., the widow), if you decline he (or she) can easily subpoena the records. Better to handle the situation voluntarily. If some of the records sought by the attorney were in the possession of the dead shareholder, then I would put that information in a letter and send it to the attorney. Best to have a written record of your communications with the attorney. Do you have to purchase the stock now owned by the widow? I think the attorney is probably blowing smoke on this point. Assuming your company does not have in place a buy-sell agreement among the shareholders, I cannot conceive of a legal basis under which the remaining shareholders would be required to purchase the shares of a deceased shareholder. A minority interest (even a sizable minority interest) in a closely-held corporation that does not kick off a nice cash stream in annual dividends has very little market value. The normal procedure would be for the bankruptcy trustee to solicit bids for the shares. I'd submit a conservative bid under the realistic assumption that there will be few, if any, other bidders. If you have questions regarding the process for sale of assets out of bankruptcy, please retain an attorney experienced in bankruptcy procedure within the federal bankruptcy court that has jurisdiction over this case. Submitted: 10-8-2006; Carol, Arizona Response: 10-18-2006; JJR Add A Comment |
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