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I am trying to sell my shares to the corp that issued them to me. What kind of contract will have to put in place for this?

Irvine, CA |

Language in the agreement.

Transfers to the Corporation. Notwithstanding anything to the contrary contained in this Agreement, a Shareholder may give, sell, transfer or otherwise dispose of all or any of his shares to the Corporation at such price and on such terms and conditions as such Shareholder and the Board of Directors of the Company may agree.

Attorney Answers 3


  1. Your question is difficult to answer for several reasons. The fact that you may sell your shares to the corporation does not mean the corporation is compelled to buy them, and may not have the legal capacity to buy them if it does not have sufficient financial reserves. You should probably structure the transaction as a redemption to obtain beneficial tax treatment, that there are not sufficient facts to develop this analysis. You should at a minimum consult with your CPA. So, perhaps a redemption agreement, perhaps a sales agreement would be necessary.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.


  2. You would have to agree with the corp on price and other terms and have a written agreement drawn up.

    The purchase could affect your taxes for better or worse.

    Does the corp agree to purchase the shares?

    Why do you want to sell the shares?

    Is the company making any money?

    George Wolff

    WOLFFLAW.com

    (415)788-1881

    This is NOT legal advice, just a general discussion of the law, as we are not familiar with the specific documents and facts of your case, etc. Please consult with a competent attorney in this area of the law for specific legal advice regarding your particular case, as the advice may vary depending on the facts.


  3. As the other attorneys have pointed out, it is unclear from your post whether you have reached agreement with the company relating to the repurchase of your shares. If you have, the company's attorneys should draw up the documentation and you should engage your own counsel for a quick review.

    However, if you have not worked out an agreement with the company for the repurchase of the shares, don't be surprised if the company is not too eager to repurchase. Many startups are asked to give "qualified small business stock" representations to their investors, and repurchasing/redeeming shares, except in certain limited circumstances, will prevent a company from being able to claim to be a "qualified small business" that can sell "qualified small business stock" for a year after the repurchase.

    Best of luck to you!

    No Attorney-Client Relationship. This post has been prepared by Inna Efimchik of White Summers for general informational purposes only. The information provided herein does not constitute advertising, a solicitation or legal advice. Neither the availability, transmission, receipt nor use of any information included herein is intended to create, or constitutes formation of, an attorney-client relationship or any other special relationship or privilege. You should not rely upon this post for any purpose without seeking legal advice from licensed attorneys in the relevant state(s).

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