Kequired intormation

Introduction

Read the overview below and complete the activities that follow. Restrictions on Transferability of Shares

A newly formed close corporation has issued shares to several individuals. In order to preserve the balance of power among those shareholders, the shares may come with certain restrictions on their ability to be freely sold or transferred. This activity requires you to identify the appropriate types of restrictions on transfer of the shares.

CONCEPT REVIEW:

Historically, a shareholder has been free to sell her shares to whomever she wants whenever she wants. In close corporations, however, free transferability of shares is a threat to the balance of power among the shareholders. In addition, as a practical matter, free transferability of close corporation shares is illusory, as few people other than existing shareholders are willing to purchase shares in a close corporation. Consequently, many close corporations restrict the transfer of shares to ensure those in control of a corporation will continue in control. Share transfer restrictions can also be used to guarantee a market for the shares when a shareholder dies or retires from the corporation.

Case Analysis

Transfer Restrictions

Read the following hypothetical scenario and then choose the best answer for the questions that follow.

Able, Baker, Carter, and Dennis have formed Ay$-$Bee$-$Cee$-$Dee Corp., a private corporation, with the goal of acquiring, developing, and selling business software applications. They are equal owners in the company and want to keep it that way to the extent possible. They also want to ensure that, eventually, there is a market for the shares should one of them die or decide to retire. Finally, they are concerned about not finding themselves as co$-$owners with certain unsavory characters. At the outset, they each own $25\%$ of the outstanding shares of the corporation. They decided that the shares should come with certain restrictions on their transferability. Answer

Kequired intormation

Introduction

Read the overview below and complete the activities that follow. Restrictions on Transferability of Shares

A newly formed close corporation has issued shares to several individuals. In order to preserve the balance of power among those shareholders, the shares may come with certain restrictions on their ability to be freely sold or transferred. This activity requires you to identify the appropriate types of restrictions on transfer of the shares.

CONCEPT REVIEW:

Historically, a shareholder has been free to sell her shares to whomever she wants whenever she wants. In close corporations, however, free transferability of shares is a threat to the balance of power among the shareholders. In addition, as a practical matter, free transferability of close corporation shares is illusory, as few people other than existing shareholders are willing to purchase shares in a close corporation. Consequently, many close corporations restrict the transfer of shares to ensure those in control of a corporation will continue in control. Share transfer restrictions can also be used to guarantee a market for the shares when a shareholder dies or retires from the corporation.

Case Analysis

Transfer Restrictions

Read the following hypothetical scenario and then choose the best answer for the questions that follow.

Able, Baker, Carter, and Dennis have formed Ay$-$Bee$-$Cee$-$Dee Corp., a private corporation, with the goal of acquiring, developing, and selling business software applications. They are equal owners in the company and want to keep it that way to the extent possible. They also want to ensure that, eventually, there is a market for the shares should one of them die or decide to retire. Finally, they are concerned about not finding themselves as co$-$owners with certain unsavory characters. At the outset, they each own $25\%$ of the outstanding shares of the corporation. They decided that the shares should come with certain restrictions on their transferability. Answer the questions below regarding those transfer restrictions.