Archives: Ownership & Leadership Transition

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Value of Independent Directors for the Family Corporation

In the wake of the financial scandals of the early 2000s, a push was made to increase the number of independent directors on public company boards.  Most public companies are required to have a majority of independent directors on their boards to be listed on the NYSE or NASDAQ.  Even public companies controlled by a majority shareholder are required to ha… Continue Reading

New Tax Rules for Tangible Property

Progress always requires change, and progress in the way we tax tangible property is no exception. The tangible property rules have long been one of the murkier areas of the federal tax code. But new regulations — the last piece of which was issued in September — clarified the rules for acquiring, improving, maintaining and disposing of tangible proper… Continue Reading

Keeping Ownership in the Family: Part III, The “Drag Along” Provision

Part III of this three-part Keeping Ownership in the Family series will discuss at a high level the use of what is commonly referred to as a “drag along” provision – a very common provision found in buy/sell or stockholders agreements for closely held and family-owned companies. Part I of this series discussed rights of first refusal. Part II discusse… Continue Reading

Keeping Ownership in the Family: Part II, Co-Sale Rights

Part I of this series gave a brief overview about the right of first refusal, one of the more common tools used by closely held companies to ensure that ownership stays within the existing group.  This Part II will discuss another tool – the co-sale right.   On first blush, a co-sale right is a mechanism to assist equity holders to sell, rather than restri… Continue Reading

Keeping Ownership in the Family: Part I, Rights of First Refusal

Many closely-held businesses have adopted agreements among their equity owners that restrict the owners in what they can do to sell or transfer their equity.  In corporations, such agreements are frequently referred to as shareholders’ agreements.  In limited liability companies, the key terms of such agreements are included in LLC operating agr… Continue Reading

Buy-Sell Agreements Between Family Members May Create Unintended Transfer Tax Liability for the Seller

There are many advantages to buy-sell agreements.  These agreements can be used to restrict the transfer of a business to outside parties, protect “S” corporation status by preventing transfers to disqualifying shareholders, or ensure the liquidation of the business interest on the death of an owner.  However, if the buy-sell agreement is betwe… Continue Reading

Proud to be a Family Business

Richard Edelman is proud to be the CEO of a family business. 

A few weeks ago, the Harvard Business School Working Knowledge (HBSWK) published an article that summarized some research on family business CEOs.  Among other conclusions, the research indicated that family business CEOs do not appear to be motivated by maximizing profits or their own compe… Continue Reading

Partial Ownership Redemption Plans in Family Businesses

The ability of a minority owner in a closely held family business to obtain liquidity for her interest in the company is often very limited.  There is not a great market to buy small holdings in such companies.  There are also generally significant contractual restrictions on the ability of an owner to sell (such as absolute prohibitions on sale, rights of … Continue Reading

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