Owners of family-owned corporations often enter into shareholder agreements that spell out whether and to whom corporate shares can be transferred. Frequently, these agreements provide for rights of first refusal by the other stockholders or a stock repurchase by the company if a shareholder wishes to transfer shares during his or her lifetime. These agreements also typically address whether shares may be transferred to any heirs upon a shareholder’s death. Unless the language regarding permitted transfers is clear, claims may arise between generations of owners concerning the proper ownership of shares upon a shareholder’s death.
A recent California Court of Appeal decision – Saccani v. Saccani – is illustrative of the type of dispute that can arise between family members over a deceased owner’s shares. Albert Saccani started Saccani Distributing Company in 1933. According to the Court, Albert’s “desire was that the company would always be kept in the family.” When he died, each of his sons – Donald, Roland, and Gary – received one-third of the company’s shares.
Continue Reading Definitions in Shareholder Agreements Matter When Transferring Family-Owned Business Stock