Can a Minority Shareholder Resign His Shares in a Private Corporation?
If you’re a minority shareholder of a private corporation looking to get out of the corporation, your best option would be to sell your shares. It is important to note that your ability to sell shares is contingent on the terms of the shareholders’ agreement. Make sure to review those provisions before taking any steps to sell your shares.
If there is no shareholders’ agreement, usually the state corporate statue is the default controlling law. In Florida, the Business Corporation Act is the controlling law if there is no written agreement among shareholders.
What are Appraisal Rights?
Appraisal rights are statutory rights that put a check on the majority shareholders’ power. Under Florida statute, a minority shareholder is entitled to obtain the fair value of his shares upon certain corporate actions as outlined in the statute. For example, at the consummation of a conversion of a corporation, upon amendment of the articles of incorporation, or at the consummation of a disposition of assets, a minority shareholder is entitled to his appraisal rights.
What is the Right of First Refusal?
A right of first refusal is generally for the corporation or the other shareholders to be able to purchase the selling shareholder’s stock before he sells to a third party. This is a contractual right, meaning it must be included in a written contract, usually the shareholders’ agreement, to be enforced.
Shareholders’ agreements may place other restrictions on the sale or transfer of shares, for example by requiring approval from all or a majority of the other shareholders before the transaction occurs. While this limits shareholders, it also protects them from being in business with someone they may not know or like.
How Do I Sell My Shares of a Private Corporation?
Most shareholders’ agreements have specific terms for the sale and transfer of shares, so you must consult those provisions before initiating a sale. Assuming you can sell your shares, the process may be fairly quick. You should consult with an attorney to make sure the purchase and sale documents are well drafted and include all the important provisions to protect you.
How Do I Transfer My Shares of a Private Corporation?
Another option would be to transfer the shares of a corporation as a gift. The availability of this option is dependent on the terms of the shareholders’ agreement. Additionally, transferring shares as a gift might also have tax implications for the transferor or transferee.
If there is no shareholders’ agreement, Florida corporate statute allows the gifting of shares. However, gifting shares under Florida law might have tax implications depending on the circumstances.
Can a Shareholder Sell His Shares to Anyone?
It is important to know what limitations are imposed to know who you can sell to. As previously mentioned, many shareholders agreements have restrictions on the sale of shares. However, some states have statutes that protect the right of free alienation of property, meaning that property owners have unrestrained power to convey property. For shareholders, this means that unless a contract expressly imposes a limitation on alienation, their shares can be sold to anyone at fair market value.