Legal Question in Business Law in Colorado

Re: Shareholder's Rights

That is a question that simply requires more information before it can be definitively answered. From the cursory facts you give, however, you may have an actionable shareholder derivitive suit against the corporation and the "execs" in their individual and representative capacities.

We are busy and probably not able to take on another client matter at this time; I would, however, be more than happy to chat with you on the phone and, if unable to assist you ourselves, I certainly can refer you to several other excellent firms and attorneys.

Very truly, Peter W. Thomas, Jr., Esq.

Petersen, Thomas & Slade, PLLC

600 Seventeenth Street

Suite 950 South Tower

Denver, Colorado 80202

(303) 260-6424

Re: Preemptive rights and shareholders' agreements

Louise Aron

Attorney at Law

Lakewood Office:

1536 South Ingalls

Lakewood, Colorado 80232 USA

(303) 922 7687

fax (303) 922-1370

Cherry Creek Office:

300 South Jackson #100

Denver, Colorado 80209 USA

(303) 780-7339

Satellite offices:

Boulder - 4450 Arapahoe Avenue, #100

DTC - 4610 South Ulster, #150

A TOLL FREE NUMBER is available to clients outside the Denver metro area.

web site http://www.bewellnet.com/louise/

[email protected]

October 6, 2000

LawGuru User

Dear LawGuru User:

Your question is very intelligent. First, pre-emptive rights and "first rights of refusal" are similar. Pre-emptive rights require that before the corporation offers _newly issued_ stock to anyone else, existing shareholders must have the first right to buy them.

Without further research, my opinion is that pre-emptive rights require existing shareholders to sell the corporation's outstanding stock to each other, but do not pertain to unissued or authorized (but not outstanding) shares. That is why I always have the shareholders in the corporations I counsel sign shareholders' agreements.

When the company was formed, an attorney should have been engaged to draw up necessary documents, including a shareholders' agreement which requires that existing shareholders first offer their shares to each other before selling to a third party. Such an agreement would also cover the procedure to be followed when any shareholder is disabled, divorces (this can be an issue), dies, or wants out of the corporation.

I urge you to have an attorney draw up a shareholders' agreement to avoid or at least minimize future problems.

If you wish to have further information about this, please contact me.

Thank you for using LawGuru.

Sincerely,

Louise Aron

Attorney at Law

Main Lakewood Office:

1536 South Ingalls

Lakewood, Colorado 80232 USA

(303) 922 7687

fax (303) 922-1370

Cherry Creek Office:

300 South Jackson #100

Denver, Colorado 80209 USA

(303) 780-7339

Satellite offices:

Boulder - 4450 Arapahoe Avenue, #100

DTC - 4610 South Ulster, #150

A TOLL FREE NUMBER is available to clients outside the Denver metro area.

web site http://www.bewellnet.com/louise/

[email protected]