Legal Question in Business Law in California

I am a shareholder in a copration of four people, I have a 1/4 intrest I want to sell my share how do I find out how to sell me shares. I was told I can't sell to just anyone it has to be to the other shareholders. How do I find out if this is true.


Asked on 8/18/12, 2:37 pm

4 Answers from Attorneys

Joel Selik www.SelikLaw.com

Look at the documents that were executed when the corporation was set up or soon thereafter. There may be a buy-sell provision requiring you to offer them to the other shareholders before you can sell to others.

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Answered on 8/18/12, 2:49 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Your ability to sell your shares to anyone would perhaps be limited in either (or both) of two ways:

(1) In many small corporations, the shareholders have entered into a contract giverning their rights and privileges. Usually, such shareholder or co-promoter agreements contain some provisions restricting the holder's right to sell his shares outside the founding group.

(2) Also, the various state and federal securities laws MIGHT apply. There are plenty of exceptions and exemptions to the requirements for registration of securities and placing limitations on their sale, but you need to make sure that any deal you consider doing fits into an available exemption.

Otherwise, the law generally favors liquidity of investments and property ownership.

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Answered on 8/18/12, 2:52 pm
Jim Betinol Withrow and Betinol Law

Both of the attorneys above are on point. Review your corporate documents to see if there are any special provisions you need to follow.

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Answered on 8/20/12, 10:25 am
Keith E. Cooper Keith E. Cooper, Esq.

If you signed a separate buy-sell agreement when the corporation was set up, you may have agreed that the shareholders can only sell to each other. The other possibility is that the corporation was set up as a "close corporation" which would prohibit sale of shares to outsiders unless the current shareholders agree.

It really shouldn't matter who you sell the shares to, as long as you get the price you want. So, the other question would be whether there is a provision in the corporation's By-laws or your buy-sell agreement (if there is one) that specifies how shares are to be valued.

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Answered on 8/29/12, 11:19 am


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