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Barrister
Barrister, Lawyer
Category: Employment Law
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Experience:  16 years practicing attorney
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I am an original stock owner (17%) of a Texas Corporation that

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I am an original stock owner (17%) of a Texas Corporation that was founded in 1997. The primary owner has sold his stock/ownership to another person. I am being asked to take a pay cut which amounts to less than 1/3 of my current salary and also being asked to sell my stock for a lump sum or a monthly payment for the next three years to supplement my income. I am 61.5 years old and was wondering what my leagl options are
Hello and thank you for using JA! My goal is to provide you with excellent service and help with your legal problem.
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Are you under any type of written employment contract with the company?
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Is there any type of Board of Directors that has to vote on employee compensation or is it all done by one person like the President of the company?
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Do the Articles of Incorporation have a provision for a forced buy out?
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Thanks
Barrister
Customer: replied 3 years ago.


No written employment contract


 


There has not been a Board of Directors meeting for years so the new owner/President makes the decision.


 


Not sure on the Articles regarding the forced buyout

Thank you for the additional information. Unfortunately in TX, if an employee is not under a written employment contract, they are considered to be an "at will" employee. What this means is that an employee can quit or an employer can fire or change the terms of employment (change hours, location, duties, pay, etc.) at any time for any or no reason at all.
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So if there is not a Board that makes compensation decision and it is left to the President, then he can make the decision as to whether to increase or decrease compensation or even terminate employees.
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As for the stock, if there is no provision for a forced buy out, then the new owner can't force you to sell your shares directly. If this is a closely held company, (i.e. less than 100 employees with a limited number of stockholders) then the original drafters may not have put in a forced buy out clause in the Articles. But the new owner could effectively force you to sell by filing an action in court for "partition" which is where a judge orders a sale of the company to the highest bidder after an appraisal is performed. The company then goes on the auction block and anyone, including the primary owner, can bid on it to buy the entire company. Then the shareholders would receive a proportional payout based on their share ownership.
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If this is a closely held company where the shares are not publicly traded, you may want to consider having a professional appraisal done for the company to determine what your shares are worth and then negotiate a buyout based on that appraisal.
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So the botXXXXX XXXXXne is that the President can make any compensation decisions and the primary owner could indirectly force you to sell out eventually...
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I am sorry that I don’t have better news, but please understand that I do have an ethical and professional obligation to provide customers with legally correct answers, even when an answer is not favorable to the customer.

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Thanks.

Barrister

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If you need further help, just reply to me via the “REPLY” button and I will be happy to continue.

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I cannot enter into an attorney client relationship, this is a public forum, and all posts are available for public viewing. There is no duty of confidentiality that attaches to any posts. The information provided is not a substitute for a local attorney’s legal advice.


Customer: replied 3 years ago.


Thank you for the information. I am not being forced to sell my stock but the added monthly income from the sale seems to be somewhat of a way for them to get the stock back since they are cutting my salary by such a dramatic amount. I will keep my company benefits (medical, etc.) which is a good thing

Yes, it does seem like a roundabout way for them to get the stock back. I mention the forced sale simply to let you know that it can be done if they wanted to get sole ownership of the company. But you can throw a money wrench in the process if they tried that by refusing and forcing them to go through the courts.
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I would suggest that you get any promise for the company to maintain benefits in writing if you decide to sell the stock as benefits are typically voluntarily provided to employees as a perk unless the company has a contractual obligation to do so. You don't want to be in the position where you sell the stock, they terminate you, and then cut off benefits.
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Thanks
Barrister
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