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Lucy, Esq.
Lucy, Esq., Attorney
Category: Business Law
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Experience:  Attorney
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What restrictions,if any, can I place on my shareholders

Customer Question

What restrictions,if any, can I place on my shareholders? What if my shareholders happens to also the same companies I sell to? I can I influence their goods sold through any laws protected by corporate law regarding ownership?
Submitted: 6 years ago.
Category: Business Law
Expert:  Lucy, Esq. replied 6 years ago.

My name is Lucy and I'd be happy to answer your questions today.

Shareholders are owners of the business. Typically, it is the shareholders that tell the business what to do (through voting), rather than the other way around. There is nothing to stop me from buying stock in AT&T and Verizon (and Sprint, and T-Mobile....), if that's what I wanted to do. Unfortunately, a majority shareholder doesn't have any authority over what other goods and services the minority shareholders purchase. If you have a closely held corporation, you could offer to buy shares back from shareholders who you believe aren't sufficiently loyal, but there's no law that allows you to put restrictions on them as shareholders.

If there is some other relationship between the business and the shareholders, the business might be able to arrange some kind of contract where, in exchange for certain conduct, people are awarded shares. But even that's really more appropriate in an employee agreement, and the employee wouldn't be bound by any duty of loyalty after his employment ended (even if he kept the shares).