Shareholder Agreement and Ownership Changes part 2

This is part 2 of 2. See Part 1 here.

Consider the event of one stockholder/manager who experiences a personal bankruptcy. The court may likely order the transfer of the investment to someone (anyone) so that the proceeds from the sale can be used to settle total debts owed. In the event that there are no provisions for selling to insiders in the company, the stock could transfer to an investor. That investor might then demand annual dividends paid on the stock. Where the original stockholders where willing to receive no annual stock dividends so that the maximum amount of profit could be re-invested in the company, this new stockholder is more interested in the immediate income. Please note that in the event the remaining stockholders are unable or unwilling to purchase the bankrupt stockholder’s stake, the court may order it sold to the highest bidder regardless of any clause that specifies only currently existing stockholders can buy the shares. Therefore it is recommended that in the event of a personal bankruptcy of any of the stockholders, the business should contact an attorney to review the situation.

Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.


In the event of a divorce, it would be wise to deal with the situation way before the split of property comes into play, otherwise you may be forced to deal with the ex-spouse of your ex-business partner which could result in a lot excessive headaches. Be extremely careful about this transfer to be certain that you do not run afoul of a divorce court judge with regards to improper transfer of assets.

Setting the calculation of the value of the shares in the agreement are just as important as any contingency plans regarding who can purchase the shares. Consider that you are the party that wishes to sell your part of the business to relocate to another city to chase a different business dream. If you have a requirement you can only sell to your existing partners, they actually can force you to sell for far less then desired or even what it may be worth simply because you may want out more then they want your share. Even if there is no requirement that you sell to them exclusively, you might have trouble establishing the value to outside investors.