I'm in a c-corporation partnership, I own 50% of the company and I am currently selling out to an interested buyer. The other partner says he has right of first refusal like he does in his other partnerships, although we never created a buy sell agreement and is not in out by-laws. His fear is that the business will go into a downward spiral if I leave and so he says I can not sell my portion of the business. Since its a c-corp and these are just shares with no buy-sell agreement, can't I just sell the shares to an interested buyer and the buyer assumes my role in the company?
Generally, unless conspicuously noted on the share certificate, restrictions on transfers are not enforceable against a shareholder who has no way of knowing about them. New York considers shares as personal property and forbids unreasonable restrictions on their sale. Additionally, where a selling shareholder is required to obtain consent of other shareholders, New York courts have found such a restriction to be not enforceable. However there are exceptions in tenant-shareholder cooperatives and professional service corporations. So please consult a business attorney. He will be able to take a look at the corporate documents and tell you if you are in fact bound to a "First Option" restriction or a "Consent" restriction. Hope this helps.
This is a most unusual scenario.
I am a NY business lawyer and before I would answer this conclusively, I would want to just double check to ensure that there are no statutes that speak to this situation regards to close corps. I do not believe that to be the case, but an issue like this is not that common. For example in CA, where we have several clients, there is a slightly different regime regards to close corps.
So unless there is some written provision that states otherwise, you cannot prevent a shareholder from selling their shares. That is their asset and is no different than preventing them from selling their other personal property.
What makes this so unusual is that in a 50/50 context it is near impossible for one partner to sell their shares to some third party that is a stranger to the business. That is, would you want to buy into a business where 50% is owned by someone who does not want you there? That is quite problematic.
I suggest you discuss this over in more detail with a lawyer so all the facts and circumstances are understood.
Most of us here, including myself, offer a free phone consult so you should take advantage of that.
Your facts seem to indicate that a buy-sell agreement must be in writing to be effective. That is incorrect. It appears that the other shareholder will claim that there was an oral agreement on a buy-sell. Now, that will be a very difficult claim if there are no facts to support this, but this could be a claim.
That said, based on your limited facts, you should be able to sell your shares. Your shares are your property and absent a written or oral agreement that would restrict your right to sell, you are free to do what you want. I strongly recommend that you speak with a NY business attorney to cover all bases.