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Maverick, Attorney
Category: Business Law
Satisfied Customers: 6391
Experience:  20 years of professional experience
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Within a corporation if a individual purchases 50% of all shares

Customer Question

Within a corporation if a individual purchases 50% of all shares and is givin operational control of any and all daily operations, as well as, assumes all debt and liabilities as of the date of the aggreement does that inividual have the right to control all operation and assets without consulting the other party? And if so, if the corporation owns and operates a business, is that individual allowed to control, operate, or sell assests as they see fit without the other parities knowledge? The final question is, does the purchaser that has control of all operation and debts, basically has control of everything including dividends issued to the shareholders?
Submitted: 7 years ago.
Category: Business Law
Expert:  Maverick replied 7 years ago.
If a person owns 50 % of a corporation's shares, all that really does is give him/her the right to cast 50% of the votes when it comes to electing the board of directors who in turn then elect the officers that are going to run the corporation. So, if for example, you control 50% of the shares and vote ytour self to be on the board, and if the other 50% of the shareholders vote for someone else to be on the board, then you really do not have control of the corporation.

If you happen to own 50% of the shares and have somehow been made the president of the corporation , then you may have the right to run the day to day operations. But this has nothing to do with assuming all the debts and liabilities as those belong to the corporation not the individaul shareholders.

The president can run a corporation but if the shareholders or the board of directors do not like the job he is doing they can vote him out or fire him.

As to dividend payouts, you have to look to see what the bylaws and the corporate resolutions say about what percentage of the votes are required before a dividend payout is passed.

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Customer: replied 7 years ago.

Well, what if I only purchase 50% of the business, not the corporation, and in the bill of sale it states that I have operational control of any and all day to day operations, as well as, I am assuming all liablity for debts as of the date of the aggrement for the purchase of that business. Does that mean I basicly own it and they are only able to recieve 50% of any net profit after all expenses?

Expert:  Maverick replied 7 years ago.
<p>There is something not right with what is being proposed to you. There are only two ways to purchase a corporation. </p><p> </p><p>The first is that you purchase 100% of the shares of the corporation and their by become the sole owner of the corporation with all its assets and debts; If you only purchase 50% of the shares then you only have 50% interest and you arestill not a majority stockholder to where you can call the shots. You would need to own at least 51% of the shares to be a majority stockholder and thereby have control of the corporation.</p><p> </p><p> </p><p>The second way is to buy the assets of a corporation.   In an asset purchase, the seller retains ownership of the shares of stock of the business. The buyer must either create a new entity for the transaction. Only assets and liabilities which are specifically identified in the purchase agreement are transferred to the buyer. All of the other assets and liabilities remain with the existing business and thereby the seller.   So if you purchase 50% of the assets and associated debts and start you own company under a different name, then you would be able to control that new company. </p>
Customer: replied 7 years ago.
I understand. Now if I just purchase 50% of a business from a sole proprietorship. Would assuming operational control and all liabilties work or not?
Expert:  Maverick replied 7 years ago.
Purchasing 50% of a business from a sole prop is really very similar to asset purchase of a corporation. Example.... if I want to be a farmer, I can either buy shares in a corporate farm that is already up and running, or I can buy all the equipment and debts of that corporate farm and run the busines under a new name. If I only buy 50 % of the equipment and 50% of those debts and the corporate farmer take his 50% and goes to CAnada never to be see from again, I would control 100% of the 50% of the assests and debts I bought, but not the 50% that the other guy took to CANADA.

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