Legal Question in Business Law in California

3 equally shared owners started up an S-Corp restaurant in CA last year. We are now short of funding and wanted to add a minority shareholder (about 50% of capital of what ONE OF US invested).

What legal procedure should we go through to add a minority shareholder in our s-corp?

The 3 of us signed the lease with the landlord with Personal Guaranteed. Should the minority shareholder be included in the lease/ Guaranty with the LL? Or we can just sign a shareholders agreement among the shareholders that the new shareholder will also be liable if the LL go for 3 of our Personal Guarantee?


Asked on 5/12/10, 1:47 pm

1 Answer from Attorneys

If you have a corporation, and have authorized more shares than you have issued, you just issue additional shares. There may be some formalities to that regarding securities laws, or not. You do not provide enough information to evaluate that. As for the guarantee, it depends on whether or not your desire to be totally sure the other shareholder is on the hook in case of default against not bothering your landlord with this transaction (or tipping them off that you are short of funding). If you go through the landlord, a simple lease addendum would do the trick. If you want to leave the landlord out of it, then an indemnity agreement with the new shareholder would probably be the best way to go about it.

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Answered on 5/17/10, 4:06 pm


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