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CalAttorney2, Attorney
Category: Business Law
Satisfied Customers: 10244
Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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In an S corporation what is the process in being bought out

Customer Question

In an S corporation what is the process in being bought out by 2 other shareholders who own 80 percent while I own 20? The company is in the positave with no debt, only assets and profit.
Submitted: 4 years ago.
Category: Business Law
Expert:  CalAttorney2 replied 4 years ago.
Dear Customer,

I am sorry to hear of this frustrating situation. Unfortunately for minority shareholders, there are only a few tools that you can use to influence the governance of the corporation (as it appears you are aware).

If you intend to sell your shares, the first thing to do is to review your governing documents and see if there are any rules or restrictions governing the sale of shares within the company, if so, you need to follow them carefully (or at least be aware of them in negotiations).

Separately, if you are unable to get a reasonably fair buy out on your shares from the other two shareholders (or you are unable to sell to a third party - if that is permitted under the governing documents), you can attempt to force a sale under the rules (this term is sometimes inserted in governing documents to protect a minority shareholder like yourself).

Finally, you may be forced to bring a court action against the majority shareholders on behalf of the corporation (a derivative suit) for mismanagement. I hope that this is helpful, while it is difficult unwinding yourself from a corporation as a minority shareholder, it is not impossible.

Best regards,

If you have any questions, or if I have misunderstood or missed anything from your original question (this does happen in this type of forum), please ask and I will respond promptly.
Expert:  CalAttorney2 replied 4 years ago.

Dear Customer,

I just wanted to follow up on your legal matter. I hope that my information was of some assistance. Please let me know if you have any further questions.

Please do not forget to rate my response so that I can receive credit for it.

Very Truly Yours,