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Law Pro
Law Pro, Attorney
Category: Business Law
Satisfied Customers: 23466
Experience:  20 years experience in business law - sole proprietor, partnership, and corporations
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I want to sell shares in a privately held Delaware corporation

Customer Question

I want to sell shares in a privately held Delaware corporation (an Inc.). MY ex-Business Partner is willing to do so. How do I document the sale? Thanks.
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Pro replied 1 year ago.

Hi. Thank you for using JustAnswer. My name is XXXXX XXXXX X’m going to assist you today.

Who do you want to sell them to and at what price - has that been determined?
Customer: replied 1 year ago.

The company is in liquidation and is currently inactive. There is no value in the corporation. I need to sell the shares to my former business partner in order to get favorable tax treatment in Germany where I live. The price will be $1 for 1 million shares originally bought with a par value of $0.001 per share. It represents 42.54% of the company. I simply do not have any idea how one documents such a sale. Are there boiler plates one can use or does he write me a receipt? Thanks for your help.


Phil

Expert:  Law Pro replied 1 year ago.
Just to be sure:

Are you and the former business partner the only shareholders?

There are no share transfer restrictions pursuant to the Articles of Incorporation?
Customer: replied 1 year ago.


No, we are not the only shareholders. There are 13 other small shareholders holding 14.92% of the shares. The largest holding is 8.14%. My former business partner has the same number of shares as I do.


 


The only restrictions in the Founders Agreement are a lock-up period of 180-days and that the sale does not violate Rule 144 resale rules.

Expert:  Law Pro replied 1 year ago.
OK, last question:

Do you have a corporate "transfer agent" - a A trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances and transactions, to cancel and issue certificates, to process investor mailings and to deal with any associated problems (i.e. lost or stolen certificates)?

OR does an officer of the corporation maintain the corporate records?

Customer: replied 1 year ago.


The president, my former business partner, maintains the records and issues Share Certificates also signed by the Secretary. I have the Signed Share Certificate in my possession.

Expert:  Law Pro replied 1 year ago.
OK, then this is very simple:

1) Surrender your share certificate to the Corporation's transfer agent - who is your former business partner.

2) The Transfer Agent acts as the record keeper for the number of units (shares) each shareholder owns.

3) The transfer agent issues a certificate to a shareholder, thereby transferring the shares.

4) The transfer agent to cancel your old certificate.

5) The transfer agent enters the details of the transfer on the transfer books of the corporation (the corporate stock registry) and states the transfer of the shares for one ($1.00) dollar.


Given your answers to my questions - that's it - that's all you need to do.


If you have any further questions, please feel free to let me know…

Please press the Accept Button(and the Smiley Face if prompted :) if I have helped you today so I am credited for my time assisting you. Pressing Accept does not cost you anymore, and only by you pressing accept am I compensated. Please don’t leave negative feedback, If something isn’t working let me know and I will continue working with you to resolve it! Positive Feedback and Bonuses are not expected, but are always appreciated!
Customer: replied 1 year ago.


I have one more question - what sort of proof do I have of the sale? My cancelled certificate? Does it simply say cancelled and is signed by the Transfer Agent? Do I get some sort of receipt?


 


 

Expert:  Law Pro replied 1 year ago.
Yes. They should give you back a copy of the old certificate with it be designated thereon that those shares have been transferred, when the transfer was made, and for how much was paid.

This copy of the "old" certificate should be marked "canceled" and signed by the transfer agent.



Thereby giving you evidence of the transfer.



If you have any further questions, please feel free to let me know…

Please press the Accept Button(and the Smiley Face if prompted :) if I have helped you today so I am credited for my time assisting you. Pressing Accept does not cost you anymore, and only by you pressing accept am I compensated. Please don’t leave negative feedback, If something isn’t working let me know and I will continue working with you to resolve it! Positive Feedback and Bonuses are not expected, but are always appreciated!


Customer: replied 1 year ago.

Sorry about the delay responding, I had to drive home in the meantime...


 


So, step by step, to cancel my certificate:


 


1. The president (transfer agent) writes by hand on my old certificate "Cancelled", the date when the transfer of shares was made, and how much was paid.



2. He signs it.



3. He makes a copy and sends it to me.



This is effectively replaces step 4 above.



Can you please confirm my understanding is correct?


 

Expert:  Law Pro replied 1 year ago.
That is correct - that's all that needs be done to effectively transfer your ownership for one ($1.00) dollar, have a record thereof, have evidence of the cancellation of your ownership.

It's their problem as to the recording keeping on the books of the corporation - but you're out.




If you have any further questions, please feel free to let me know…

Please press the Accept Button(and the Smiley Face if prompted :) if I have helped you today so I am credited for my time assisting you.

Pressing Accept does not cost you anymore, and only by you pressing accept am I compensated by JustAnswer for assiting you. Please don’t leave negative feedback, If something isn’t working let me know and I will continue working with you to resolve it! Positive Feedback and Bonuses are not expected, but are always appreciated!


Law Pro, Attorney
Category: Business Law
Satisfied Customers: 23466
Experience: 20 years experience in business law - sole proprietor, partnership, and corporations
Law Pro and 3 other Business Law Specialists are ready to help you
Customer: replied 1 year ago.

Thanks for your help. Most appreciated.

Expert:  Law Pro replied 1 year ago.
You are more than welcome!

If you have any future legal questions then ask for me, Law Pro, and I'd be more than happy to assist you.

Have a great day!!

I should have mentioned since you're presumptively German - my last name is "Freitag" .

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