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I am operating a business in Texas. One of the shareholders…

I am operating a...

I am operating a business in Texas. One of the shareholders sued the Company and received a settlement agreement. In the Default section there is a sentence about modifying or altering the rights of creditors or consent to such relief. I have other former shareholders who are willing to cancel promissory notes to lower the long term debt of the Company. If I took back promissory notes would that legally be considered modifying or altering the rights of creditors?

Lawyer's Assistant: Because laws vary from place to place, can you tell me what state this is in?

I am operating a business in Texas

Lawyer's Assistant: Has anything been officially filed? If so, what?

The settlement agreement and dismissal of the lawsuit claims

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Answered in 34 minutes by:
3/28/2018
Lori
Lori, Attorney
Category: Legal
Satisfied Customers: 2,096
Experience: Attorney with over 25 years experience
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H​ello. Let me see if I can assist. Can you upload the agreement so I can review the purpose of that provision in the settlement agreement to see if it applies to your situation?

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Customer reply replied 3 months ago
this is a copy of the Settlement and mainly the question applies to 6.C and whether the promissory note holders as former share holders would fall under "debtors" here and the exposure of them turning in their promissory notes and receiving back shares.

O​kay. The former shareholders are owed money by the company and are creditors of the company, correct?

Give me a minute to review.

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Customer reply replied 3 months ago
their shares were brought back by the company for debt instead of paid in whole

6​(c) under the Default provision of the settlement agreement relates to the Company seeking relief(or consenting to relief) from a court to modify debt to creditors of the company. The intent of the provision is to prevent the company from seeking judicial relief to dilute debt to creditors, especially the creditor in the settlement agreement (West). West does not want a reorganization or alteration of debts because it would reduce the amount due to West under an unsecured debt by the company.

Does that clarify?

The forgiveness of debt owed to former shareholders is not a judicial relief of debt or reorganization of debt owed to creditors under 6(c). In fact, West would benefit from the removal of other creditors owed money by the company.

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Lori
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