Stockholders' agreements define the relationship among stockholders and the relationship of stockholders as a group to the corporation. These agreements can control the economics of the entity – whose entitled to distributions, in what circumstances, and how much – and governance – who gets to vote, in what circumstances, and when. They are also crucial in creating a market for otherwise illiquid interests in the closely-held company. In the context of S Corps, protective provisions in these agreements are essential to preserve the entity’s S Corp election by preventing transfers to ineligible persons, preserving a single class of stock, and not breaching the maximum number of eligible holders. Stockholder agreements can also have a substantial impact on related estate and gift tax planning and employment agreements. This program will provide you with real world guide to drafting the major provisions of stockholder agreements for C Corps and S Corps.
Brian J. O'Connor, Venable LLP
Ronald A. Levitt, Sirote & Permutt, PC
- Liquidity rights – what events trigger the right to sell, to whom, and for how much?
- Protective provisions for S Corps – preventing transfers to ineligible holders
- Provisions for terminating an S Corp election
- Valuation methodologies to avoid conflict – book value, fixed value, earnings formula, appraisals
- Employment provisions stockholders’ agreements – vesting, forfeiture, capital contributions & IRC Section 83
- Impact of stockholders’ agreement on estate and gift tax planning