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MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience:  Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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We initially incorporated a private S-Corp with four equal

Customer Question

We initially incorporated a private S-Corp with four equal owners. Since that time we have allowed others to buy stock in the company and the four original owners pro-rata share is established. We have Buy-sell insurance on the four original owners and have a draft buy-sell agreement yet to be signed by all shareholders. My question is if we want to remove one of the original owners (shareholder) and have the S-Corp buy back the stock what options do we have? Can they hold on to their shares even though we remove them from the company as an officer/board member? I assume there will be a good faith offer based on our latest stock evaluation for their portion of the stock.
Submitted: 4 years ago.
Category: Business Law
Expert:  MShore Law replied 4 years ago.
Thank you for the post, what do the bylaws state with respect to the forced sale of shares of stock?
Customer: replied 4 years ago.
The Bylaws do not specifically state anything regarding a forced sale. The Stock Certificate states that the holder or a duly appointed attorney can endorse a transfer of the stock share. We are drafting a collective buy-sell agreement that addresses death, individuals leaving and the like, but nothing regarding us wanting to rebuy (forced) the company stock. We have had numerous discussions regarding the buy-out of one of the founders but never based on negative situations. We are a Delaware Corportation DBA is NC.
Expert:  MShore Law replied 4 years ago.
Thank you, XXXXX XXXXX cannot force a sale, the Corp will have to make a compelling offer and amend its bylaws so as to be able to force a sale via a Board vote should a similar situation arise in the future
Customer: replied 4 years ago.
Thanks, That's what I assumed. What if the individual in question has not paid back in full their portion of the investment in the company that is the basis for their pro-rata share? Would we make our compelling offer on that fact?

Expert:  MShore Law replied 4 years ago.
Yes, that would make a compelling offer because you could argue that the failure to pay back the full portion offsets the ownership interest.
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25285
Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
MShore Law and 3 other Business Law Specialists are ready to help you
Customer: replied 4 years ago.
Thanks
Expert:  MShore Law replied 4 years ago.
Thank you, XXXXX XXXXX good day.

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