Business Question

Learning Goal: I’m working on a business writing question and need an explanation and answer to help me learn.

Description

Assume for purposes of this assignment that you have been asked to invest $50,000 in a new business. The other investors will be the executive officers and, will invest $150,000. You will be a 25% owner and be employed as an Assistant Vice President. All four investors will constitute the Board of Directors.

You understand that it is very difficult to sell a minority interest in a closely held business to a third party. You also do not want the other three owners to take advantage of their position of controlling the Board of Directors. You have expressed these concerns to the other three owners, and they have asked you to propose the general terms of a shareholders’ agreement that will address your concerns.

Your task is to prepare an essay (500-750 words) that addresses the following questions:

1. When should you be able to sell your shares, and when should the company or other owners be required to buy your shares?
2. What should happen if a shareholder wants to sell shares to a third party?
3. Given that there is no market for the shares of a closely held corporation, how should shares be priced when a sale is triggered?
4. What decisions of the Board of Directors, if any, should require unanimous consent?

Note: The purpose of this assignment is not to test your ability to come up with the “right answer” to these questions. Rather, the purpose is have you demonstrate your understanding of the general framework of shareholder agreements and how they are used to address the matters of unique concern that arise in closely held corporations.