Legal Question in Business Law in California

I would argue with their position and litigate the matter if necessary. How much money did you put into the company? Contact me directly.

What you probably need is a letter from a lawyer to get them off the dime. I would, of course, need to review the agreement first, but it sounds like you have the better position. Please give me a call if you want to discuss this situation further.

Jon Reich

310.478.2541

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Based on the information given, I'd think your chances of prevailing in a contested action to be bought out at "fair value" are not any better than 50-50. It sounds as though your departure was at least largely voluntary, and not caused by any particular action by the corporation or other shareholders (but I know a lot of these departures are not entirely voluntary but result from coercion or subtle pressures). Absent a shareholder agreement, a corporate shareholder has no inherent right to be bought out. In court you would bear the burden of proving that the mandatory buyout provisions extend to departure circumstances such as yours, and the degree to which your leaving the company was voluntary or not may be the controlling factor.

A lawyer advising you would need to read the entire agreement to see, among other things, how tightly the triggering conditions are written. Highly specific language may indicate an intent to exclude marginal situations, while general terms may broaden the scope. The lawyer should also interview you to look for circumstances that may have bulldozed you into quitting, such as demotions, bullying, failure to fund your department, or the like.

It's worth looking into whether the extended negotiations over price could be construed as a waiver or estoppel of the company's right to take a different position. Also, a lawyer should look at whether the company's structure and management comply with the Corporations Code as to things such as number of directors, holding of meetings, keeping minutes and records, refraining from illegal distributions, and other such mismanagement.

Finally, good attorney advice would include discussion with you of whether a voluntary settlement at a less than full-value price is a better possibility, whether the value of the stock is more likely to triple or go to zero in the next 18 months, and what life would be like as a disaffected minority shareholder, asserting rights as such.....sometimes shareholders get bought out to rid management of a persistent nuisance.

I agree completely with Mr. Whipple, and would add that if you left voluntarily, it is you who breached the consideration clause of the SA you quote. You cannot take advantage of your own breach to force a purchase of your shares (unless there are other provisions in the SA that you can rely on). That clause might allow them to force you to sell your shares in this situation if you did not want to, but it cannot be used by a voluntarily departing shareholder to force a purchase.

I would not answer definitively without looking at your corporate documents, bylaws, and the communications between you and the other members, and doing just a little research. There may be something in your communications that suggests they will buy you out or have a duty to. If there is any leg to stand on, they would probably rather buy you out than litigate, so smart representation may bring them around.

Best,

Daniel Bakondi, Esq.

The Law Office of Daniel Bakondi

870 Market Street, Suite 1161

San Francisco CA 94102

[email protected]

415-450-0424

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