Tuesday, May 15, 2012

On avvo.com, a guest asked the following question: Is it legal to sell a company without telling the shareholders?

I thought the answer by Mr. Linscott Roberts Hanson (http://www.avvo.com/attorneys/60068-il-linscott-hanson-1133366.html) was good enough to share:

Unless there is some sort of agreement restricting the 50% shareholder's right to sell, requiring notice, first refusal options, etc., there is nothing illegal about a 50% shareholder selling his stock to a third party.  In so doing, he has not interfered with the rights of the other stockholders - they are legally unaffected by his sale.  If they had pre-emptive rights to acquire shares before his sale they still will have those rights after his sale.  Most corporations are subject to statutory restrictions on so-called "organic acts" such as merger, sale of the corporation's assets in bulk, amendment of the corporation charter and so forth.  Usually (not always) these kinds of major changes require a larger than majority vote - something like a 2/3 vote.  Thus someone acquiring "only" 50% of the stock would lack the votes to make major changes in the corporation.

Shareholder agreements can be written which include what are called "tag along" or "drag along" rights.  The former would give the other shareholders the right to take advantage of the deal the 50% shareholder negotiated, and have their stock purchased at the same price, while the latter would give the 50% shareholder the right to force the other shareholders to sell their shares along with his.  Evidently neither arrangement was in place here.

The most surprising thing about your question is that someone would be willing to buy a 50% interest without acquiring the remainder of the stock.  50% is not control, in fact there are court opinions that refer to it as a minority position.  If is unusual that someone would purchase a minority position.

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Monday, October 11, 2010

Something is wrong with the way our politics are evolving

I think I am like most Americans. I have some extreme liberal views, I have some extreme conservative views, but I have mostly centric views. I tend to lean "right" because it feels safer to do so. One of my extreme conservative views is that the Constitution is very important document and that it should be treated with the utmost care because it is the check on our government. The Consitution is what gives the people their power. This comment by Robert on abajournal.com is one of the best explanations of why I feel the way I do:

I can’t believe how everyone overlooks the obvious.

Either the Constitution means something specific, or it means nothing at all.  If “what it means” is completely up to a vote of nine political appointees, then it has no specific meaning.

If it has no specific meaning, then government limitations are non-existent.  The only limitation is what the USSC will allow, which is only limited to what they can find emanating from penumbras. Since they are appointed for life, we citizens have no control over the government at all, since that puts all power in the SC. 

And that is the definition of “tyranny.” It isn’t a question of whether the majority of Americans LIKE what they are doing, it’s a matter of whether or not there are limits.

But the Constitution IS the limit? Really?  The USSC is 9 people sworn to uphold and defend that document, charged with the responsibility to settle cases and controversies which may arise under it, but there’s a singular problem with that.

We so regularly see decisions that are 5-4, and no one ever stops to consider that this means that AT LEAST 4 (maybe 5) either haven’t the love for the Constitution the job and oath demand, or they haven’t the wit to understand it correctly. 

Ever stop to think about who ratified the Constitution? It was the average man of 1787, who probably didn’t go to college since there were only 20 in the U.S. at the time, and couldn’t possibly have gotten information about the document from any of the usual modern sources;  there were no USSC cases, DeTocqueville was a half-century from being born, and the Federalist Papers weren’t started until six States had already ratified. Think people who just fought a war to get rid of a government they couldn’t control would replace it with one they couldn’t understand?

The bottom line is that it is a VERY simple and VERY clear document, and if four (or five) of the nine brightest lawyers in America can’t get it, we have a serious problem.

You can view the full article that spawned this comment at http://www.abajournal.com/weekly/article/stevens_says_court_will_eventually_straighten_itself_out