Legal Question in Business Law in Arkansas

Re: Closely Held Stock Problem

Closely held corporations and other small businesses are wonderful when things are going well. They can be very difficult to handle when it comes time to wind down.

Keep in mind that legally the value of the corporation and therefore the stock is not determined by the effort or diligence of the shareholders, but rather on the actual value of the business. It is no different than owning stock in FedEx or a publically traded company. Your stock price/value is determined by the assests and value of the company.

There are lots of stratigies for dealing with this situation. You can hire a business valuation expert to fix a price for the stock. Sometimes an accountant can perform that service. You could use mediation or arbitration to have a third party assist you reach a resolution. Mediation is a negotiation process. Arbitration is an informal process where you present your views and proof to the arbitrator who makes a binding decision.

Either party has the ability to force the dissolution or liquidation of the corporation. I would check your by-laws to see what provisions, if any, they contain for such a process. Getting adversarial is not healthy for your family relationship and it is usually not productive for you paying fair value for the stock.

I hope these thoughts are helpful. You have a complex situation and you need help to think through the specifics of your situation. Every corporation is different. Each situation requires an unique solution. If I can be of further assistance to you, please do not hesitate to contact me at 800.403.7868 or [email protected].