About David K. Staub Expertise I am a business and tax attorney and have spent more than 30 years assisting people with contracts in a wide variety of business situations. I can answer questions about basic contract issues. My experience includes almost all common contracts including employment agreements, contracts for the purchase and sale of a business, shareholder agreements, partnership agreements, LLC operating agreements, leases, software development agreements, distribution agreements, franchise agreements, joint venture agreements and software license agreements, to name a few. I can also direct people to sources for answers to specific legal questions which cannot be answered in a forum of this nature.
Experience
Experience in the area I have been an Illinois business attorney for almost 30 years. I have an extensive practice in the mergers and acquisitions area and have been involved in the tax and legal issues on hundreds of business transactions.
Organizations Illinois State Bar Association;
Chicago Bar Association (former Chairman of the Corporation & Business Law Committee and former Chairman of the Mergers and Acquisitions Subcommittee; former Executive Committee member, Federal Tax Committee and Chairman of subcommittee on general tax issues); Glenkirk Foundation (Trustee; Vice-Chairman/Strategic Planning); Association for Corporate Growth, Chicago Chapter; Midwest Entrepreneur Forum; Midwest Association of Alpha Delta Phi - President
Publications Commerce Magazine; YLS Journal; ISBA Section of Taxation Newsletter
Education/Credentials Harvard Law School, J.D., 1977; University of Illinois, B.S. in Accounting, with highest honors, 1974
Disclaimer Responses are intended to be informational only. No response is intended to constitute legal advice or create an attorney-client relationship. Online advice is not a substitute for consultation with an attorney.
Question I have a partner in a sub s corp who has been attempting to buy me out since last March, 2007. His initial offer was what I thought to be too low. We bought out our other partner and I was looking for terms similar to what we gave him at his buyout. Should I have expected similar terms since I had the same percentage of ownership as the partner who was bought out earlier? The company was doing OK financially at the time of our first partners buyout.
At the time my partner made an offer to me we had been doing extremely well financially with the business.
I was terminated soon after I rejected the first offer and the second offer was worse than the first.
Well now 17 months have gone by and my partner says he doesn't have the monies to buy me out because he went through all the company profits, close to $1,000,000 dollars, by mismanaging, poor quality control decisions and the purchase of equipment we really didn't need.
Since I have been gone and have no control of any day to day operations and he personally has basically run the place into the ground financially, should I expect an offer similar to the first offer made in March 2007 or can he justify a much smaller offer, because of his ineptitude, lack of business sense, and his willingness to listen to bad advise offered to him by our accountant and legal counsel.
He has basically cut me off from all financial records and has refused to even discuss a settlement. We are trying to set a court date, but I would like to get a feel for what I should expect when we finally do get our day in court.
Also anything I can do as far as the accountant and legal advisor, for sending our company into this financial tailspin.
Answer I assume that you have litigation pending against either your "partner" (really a shareholder) or the corporation since you refer to "trying to set a court date." My best advice is to listen to your lawyer who knows a lot more about the facts than you can possibly spell out here.
As to your rights, as a shareholder in a corporation, your rights are limited to basically the following (in no particular order): rights given to you under your state's business corporation act, rights that have developed under English case law over the last several centuries, and and rights under any explicit agreements you have with the other shareholder or the corporation.
I assume there are no explicit agreements between you and the other shareholder or the corporation, or you would have mentioned them.
Your common law and statutory rights vary from state to state, but typically the law clearly puts very high hurdles for a shareholder to meet in order to prevail against the corporation or its officers or directors.
Without more facts, all I can do is give you some very general comments on your situation:
1. It is very unlikely that you have any rights to force the corporation or the other shareholder to buy you out, in the absence of an agreement requiring a buyout. Courts may, in some states, require a buyout as a remedy of your statutory right, but that is usually left to the discretion of the court.
2. The price that was paid to your previous "partner" may have some bearing on the price that should be paid to you, but it clearly does NOT set a minimum that your shares should bring.
3. Directors of a corporation have fiduciary duties to the shareholders including duties of care and duties of loyalty. However, they are also broadly protected by the "business judgment rule." As long as the directors exercise care, they are entitle to make bad decisions. The fact that the advice apparently came from the company's lawyer and accountant seems to indicate that there was collective wisdom involved. It is unlikely that a court will find liability if the process was correct but the decision turned out badly.
In short, unless there are facts that are more compelling than those you have given, I suspect that you will not find the relief you are looking for.
