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David L
David L, Attorney
Category: Business Law
Satisfied Customers: 3255
Experience:  Corporate and Business lawyer since 1997
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Im raising capital in a closely held C Corporation by selling

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I'm raising capital in a closely held C Corporation by selling shares of stock. How do I determine when a dividend would be due to stock holders? How would the investor liquidate there investment. In other words how do they sell there stock? Is it bought back by the corporation? Do they sell it themselves to another investor? Can an agreement be drafted prior to the purchase of stock with the corporation having the right to buy back the stock at a certain period in time at a pre-determined price?
Submitted: 5 years ago.
Category: Business Law
Expert:  David L replied 5 years ago.
Hello. These are all issues you would address in a well-drafted shareholder agreement. Each of these questions you ask can be addressed in the agreement. You can determine up front how and when dividends will be paid. You can also (and would want to) place restrictions on the sale of stock. For example, in a close corporation, you want to make sure that you retain control over who becomes your shareholders. One way is to give the corporation the first right to buy back shares offered for sale. You can also set the formula for determining the price, whether pre-existing or at something like "fair market value."
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