It is legal for you to settle a suit be paying over stock, if that is your question. Whether that is a fair settlement to you is a separate issue and it would need to be analyzed by an accountant and an attorney. What are they suing you for?
The best defense is a good offense. You should consider a countersuit for wrongful termination. Although you have not the money to hire a lawyer, one might take it on a contingent fee basis (no cash down required) if you were fired without cause. But lawsuits are extremely unpleasant, particularly among siblings. So if you think their offer is fair, after getting professional advice. take it.
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DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California.
(Bryant) Keith Martin
There are a lot of potential details that would influence an appropriate response from an attorney. The best advice, given the dearth of facts, would be to find a competent business attorney who is willing to give you a free consultation (at least 15 minutes).
Here are some questions that would need to be factored into an opinion for you: What does the partnership / membership agreement say about capital contributions? Can all shareholders / members force a capital contribution? Are there other factors at play (i.e. some form of harassment)? Is this documented?
In general, it's perfectly fine to proffer stock at fair-market-value (FMV) rates as a settlement to a lawsuit. Of course, that's makes the assumption that the lawsuit is legitimate and not fraudulent. It's also making the assumption that FMV is undisputed.
Good luck to you.
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You ask is this legal? The answer is yes - a company in Massachusetts can terminate an employee/shareholder for cause and yes it can sue that terminated employee/shareholder for whatever cause of action they allege and yes as unseemly as it may appear they can then propose to settle your claims against them and their claims against you if you agree to sell your stock back to the Company or to your fellow shareholders. Not knowing the facts behind the company's actions I cannot however advise as to whether such actions were prudent and whether they will hold up in court.
My suggestion would be to immediately speak with a Massachusetts attorney (I assume you are a Massachusetts corproation not a Delaware), have him or her send a letter putting your siblings on notice and to have the attorney answer the complaint, file a counterclaim and if appropriate file a counterclaim under MGL c. 93A (triple damages and attorneys' fees) for bad faith and unfair dealing. If you were not paid your last check when you were terminated you also can file a Complaint with the Massachusetts Attorney General's office for unpaid wages. It also carries the threat of criminal prosecution for the officers of the Company if they fail to pay up. These actions will get you back to an equilibrium where you then can properly assess what the appropriate steps are to resolve this matter without being pressured to settle.