Expert: John Varghese - 12/1/2009

Question
I want to sell my interest in my company.  It's a privately owned close corporation in California.  I have about 70% of the shares for sale.  I have buyers that are trying to leverage me.  I also have found someone who says he will bring other buyers to the table, but he wants a commission and exclusive to sell the shares at about 3%.  I don't mind the exclusive if he can get the job done.  Is this OK for me to pay a commission to this person.  He is a lawyer but is not a securities dealer.

Answer
Dear Steve,

Since the person whom you have found is just negotiating a deal and is not coming within the definition of a "securities broker/dealer" there would not be any legal bar for him to engage in the business. The Commission if any should be for negotiation and not based on the value of the deal, in which case he would come within the definition of a broker and you would be liable for violating the security transaction norms. However the exclusive right as sought by him would not be seen as a brokerage. Before you proceed further, however it would be better to check in the California Corporations department site: http://www.corp.ca.gov for further details regarding your deal.Since I am not practicing in California, this would be the best answer I can give to your question.

Regards

John Varghese