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Selling minority shares in s-corp shares
Houston, TX
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Posted about 1 year ago in Securities Offerings
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I have some shares (minority shares)in an s corp through employment. After I have moved on to another company I found out that the s corp is not distributing any of its income and the owner of the company has signficantly diluted my shares in the company. So essentially I am paying taxes on money I have never received and probably will never see. I have offered the company/owner to acquire my shares but, I do not get either an yes/no. How can I get rid of my shares in this s corp company? Is there anyway I can force the s corp to buy back my shares? or can I donate these shares to charity?
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Answers (1)
Joseph M. Campos
This attorney is licensed in Washington.
Posted about 1 year ago.
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As a shareholder in a Subchapter S Corporation, it is possible you are a party to a Shareholders' Agreement or a Buy/Sell Agreement that restricts transfers of your shares. If you are a party to such an agreement, it may require you to first offer the shares to the company and/or the other shareholders, and may also provide that you have a contractual right to cause the company to buy or redeem your shares, though the latter is not a common or standard provision. If you do have a right to require the company to repurchase your shares, it would be subject to applicable state laws governing distributions to shareholders. In particular, a company that is insolvent generally cannot repurchase shares as doing so would constitute and unlawful distribution to the selling shareholder.
In addition, your shares are likely "restricted securities" and will require you to comply with state and federal securities laws regarding resales of restricted securities. Donating the shares to charity may be possible, but the transfer would again need to comply with any Shareholders' Agreement or Buy/Sell Agreement that may exist, as well as securities laws regarding restricted securities. |
