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Roger L. Neu

 

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Minority Owners

Question: Will the key employees who hold small amounts of stock be subject to the noncompete agreement?

This is an issue that usually warrants a lot of attention by both Buyer and Seller. Special provisions generally will need to be made for key employees who are not receiving a substantial amount of the proceeds from the sale. These employees will need to make a living if they do not continue in the employ of Buyer or will need to receive severance payments or have some other arrangement that will not put them in a worse position after the sale than they were in before the sale.

Question: If I buy all the company’s stock (instead of purchasing assets), can I hold each of the selling shareholders 100% liable for any future claims?

Generally, a Buyer will want to have each of the shareholders be "jointly" and "severally" liable for any claims that the Buyer may have following the purchase. Selling shareholders, on the other hand, will not want to be liable for any greater amount than the proceeds actually received by them in the sale. As a matter of common law, if one shareholder is sued for the entire amount of the claim, that shareholder will have a right of claim against the other shareholders for their prorata contribution. In the case of smaller minority shareholders, Sellers will generally argue for "several" liability where each of the minority shareholders is only liable based on his percentage ownership. The largest shareholders will usually have joint and several liability where each of them can be sued by the Buyer for the full amount of the claim.

 


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