Can I Be Forced to Sell My Shares in a Company? - Helix Law (2024)

FAQs

Can I Be Forced to Sell My Shares in a Company? - Helix Law? ›

A Shareholder cannot generally be forced to sell shares in a company unless you have either agreed to a process resulting in that outcome, or the court orders that outcome.

The answer is usually no, but there are vital exceptions. Shareholders have an ownership interest in the company whose stock they own, and companies can't generally take away that ownership.

There is no rule of law that caters explicitly to the removal of a shareholder, and a shareholder may not be forced to sell or forego its shares.

Generally, a shareholder can refuse to sell their shares, per the terms of the agreement. If there is no agreement or the agreement doesn't have a buyout clause, then the shareholder may be forced to sell their shares.

If you do not find a clause addressing this issue, then it's likely that you can just keep your shares. Unless stipulated otherwise, the company cannot force the sale.

You log on to your brokerage account and notice that some of your holdings have been sold. Should you panic? Well, if your broker sold securities out of your investment account without permission, then these actions may not be legal. However, chances are that your broker did nothing wrong at all.

No specific statutory provision under the model articles can force shareholders to sell their company shares. However, certain circ*mstances may result in the removal of the shareholder. Forcing a shareholder out of the company can be tricky, but you can achieve this in several ways.

Without an agreement or a violation of it, you'll need at least a 75 percent majority to remove a shareholder, and said shareholder must have less than a 25 percent majority. The removal is accomplished through votes, and the shareholder is then compensated upon elimination, according to Masterson.

There is no general right to force out another shareholder no matter how much you may disagree, which is why a shareholders' agreement can be so helpful. The court can intervene on behalf of a shareholder where there is what is known as “unfair prejudice”.

If you own shares in a public company that goes private, you must sell your shares at the acquisition price that's been agreed to by the parties.

Can my partner force me to sell my shares? ›

While a partner may not be able to force you out, there may be other provisions in these agreements that limit your ability to fully participate in the upside. For example, a wealthier partner could control profit distributions and keep all the money within the company.

No, a public company cannot require you to sell shares as part of a share buyback program.

If you own more than 50% of your company's shares, you might think you have ultimate control. While it's true that a majority stake will likely prevent the company from being sold without your consent, it doesn't protect you from being fired.

Through a buy-sell agreement, it is possible for the majority to compel minority shareholders to sell their shares. This commonly occurs in cases of company-wide buyouts where there is a need for a forced buyout of all or certain shares held by minority shareholders.

No. A shareholder owns a company through the purchase or acquisition of shares. A director is appointed by those shareholders to manage the operational activities of a company. However, a shareholder can also be a director.

In private companies the model articles do not deal with the compulsory transfer of shares on ceasing to be a director and/or employee. The unwanted director cannot be forced to sell his shares. Forced share sales are only possible if the articles or shareholder agreement makes specific provision or there is consent.

The court may need to decide what happens

In some cases, people can be forced to sell, but usually not by a business partner directly. This happens if the two can't come to an agreement, the case winds up in court, and the court orders the sale. Generally, though, this is seen as something of a last resort.