Stock Purchase Agreement Closely Held Corporation
The fundamental point of disagreement that the Tribunal had to resolve was therefore whether the purchase price of the shares should be based on the actual tax return of previous years, contrary to a retrospective analysis of what should have been reported. In court, the court ruled that the parents simply intended to calculate the purchase price based on the information contained in the tax returns. The intention was clearly to avoid such disputes. The son`s offer was therefore accepted. In this case, it is a buy-sell agreement for a family company that owns the Iowa S-Corporation. The agreement provided that the son, who took over the family business, would acquire all outstanding common shares after the death of his parents. If the son exercised the option, the scammer`s personal representative would be required to sell the scammer`s shares at the price set by the agreement. The agreement stated that the purchase price should be the “fair market value” of the shares. An endorsement of the sales contract provided the method of calculating fair value.
The share transaction is expected to close on “a date agreed by the parties, which does not exceed 90 days after the exercise date of this option.” The father died in 2000 and the son used his option and bought all of his father`s shares for 6,517 $US per share. The fair value of the shares was calculated on the basis of earnings recorded on the entity`s actual tax returns. No one challenged this method of calculation. Because of the risk inherent in fraudulent activities, the sale of shares is a highly regulated transaction by both public and federal authorities. Unfortunately, many shareholders mistakenly believe that private companies do not have to worry about securities rules because of the limited number of parties involved and the relatively limited value of non-shares. They often sell shares either through oral contracts or in haste written agreements without consultation with a corporate lawyer. Although small private companies have a number of exceptions to securities registrations, directors, executives and shareholders of these companies still have to comply with numerous government and federal rules regarding the sale of shares. Indeed, it can be argued that, in the smaller and more intimate environment of a confiscated individual, the risk of fraudulent activity is particularly worrying. For more information on exceptions to registration requirements, see “Exceptions to the registration of federal securities with the SEC.” Given the inherent risk and related government requirements, it is important that company employees consult with an experienced corporate lawyer before issuing shares. In stock purchase and sale contracts, money is always exchanged for the stock.
A well-developed share purchase agreement not only protects the seller and purchaser of shares, but also ensures that the company complies with securities rules.