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Situation: Closely held corporation, two shareholders, each

Resolved Question:

Situation: Closely held corporation, two shareholders, each owning 50% of the stocks; although both work the business daily and oversee the day to day operations, one (Mr. A) by far, carries most of the load and is the brains behind the success; hostile relationship between the two.

If Mr. A becomes ill and is unable work the business daily, can he have a family member step in and act on his behalf? Can he transfer stocks to that family member to protect his interest in the business?
Submitted: 2 years ago.
Category: Business Law
Expert:  lwpat replied 2 years ago.
Thank you for posting your question to JA/Pearl. Legal questions often take time for research or I may be offline so please be patient, I will reply.

can he have a family member step in and act on his behalf?

He can execute a power of attorney giving someone else that legal authority. However, if there is a hostile situation, that would probably only get worse.

Can he transfer stocks to that family member to protect his interest in the business?

Yes he can. He can sell or transfer his portion of the business to anyone.
Customer: replied 2 years ago.
does first right of refusal apply if stocks are transfered to adult child+
Expert:  lwpat replied 2 years ago.
Is there an operating agreement that sets out the right of first refusal?
Customer: replied 2 years ago.
not an operating agreement separate from from what is mentioned in the articles of incorporation which is specific to the sale of stocks and doesn't address the operation of the business.
Expert:  lwpat replied 2 years ago.
It would depend on the exact wording in the articles of incorporation but normally a transfer to a child would not trigger the right of first refusal.
lwpat, Attorney
Category: Business Law
Satisfied Customers: 25384
Experience: Attorney with over 35 years of business experience.
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