Legal Question in Business Law in California

Re: Board resolution

Corporate resolutions are simple enough to prepare, but more information is needed. You might also have a buy-sell agreement among the shareholders that place limitations on how and when new shares can be sold or issued. You need to contact a local to discuss the particulars fo the transaction so a customized resolution may be prepared.

Re: Board resolution

The resolution should probably be drafted by an attorney, and probably one retained by the company (issuer).

The attorney, corporate secretary, or other person would review the Articles of Incorporation to see how many shares are authorized, and the corporate stock register to see how many are already issued and outstanding. On that basis, he/she would calculate the number of new shares that must be issued and whether the issuance is authorized by the Articles.

He/she should also check to make sure the proposed issuance of new shares does not violate any existing bylaw or agreement between the shareholders, such as a right of first refusal or other anti-dilution provision. If there are private agreements, it is possible the directors' power to authorize the issuance by resolution may be limited.

Once written, the resolution should be debated, voted on and passed at a properly-called meeting of the board of directors.

I think it is fairly important that the new shareholder pay an adequate consideration for his/her shares. I assume the corporation and the proposed shareholder have negotiated terms for what the corporation gets in exchange for the shares.

An alternative to consider is to have each present shareholder sell some shares to the new shareholder; e.g. if ownership is now 100-100-100 shares, each sells 25 shares to the new person so it ends up 75-75-75-75.

Someone in this corporation should learn the basics of corporation law and administration. My concern is that if they don't know how to prepare and adopt resolutions, there may be other problems sucg as failure to pass other resolutions pertaining to the basic organization and operation of the corporation. There are good paperback books on formation and management of small corporations, and they usually contain sample or model corporate resolutions that cover or can be adapted to cover your needs and most other corporate business.

Re: Board resolution

I'm happy for you. But, you need lots more than a simple Resolution, including but not limited to: amended shareholder agreement, amended buy-sell agreement, updated bylaws, and an education on how corporations have to be managed and documented. Without doing it right, now, you are simply buying a lawsuit or legal problems later that will cost a lot more in legal fees.

Feel free to contact me if you are prepared to do it right.