Question

Tom owns 700 shares of stock in Bottle Co, a (1102) C-Corp. Bottle Co. is a closely held family corporation with only members of the family owning shares. There are 10 other family members owning various shares of the company. Tom would like to retire from an ownership role in the company. If the company agrees to purchase back all of Toms shares.

A) What are the ramifications to him, and to the company under the proposed transaction.
B) What restrictions will be placed on him or the company under the proposed transaction
C) If Tom were to consult for the company on an occasional basis, would that change the results of the transaction any and if so how?

Answer 1

If the company agrees to purchase all of Tom's shares, he would receive a financial payout and retire from his ownership role. The particulars of the buyback agreement would also determine the restrictions placed on Tom or the company. Consulting for the company on an occasional basis would not change the results of the transaction.

Step-by-step explanation:

The ramifications to Tom and to the company under the proposed transaction would depend on the terms of the buyback. If the company agrees to purchase all of Tom's shares, Tom would receive a financial payout and would no longer hold any ownership in the company. This would allow him to retire from his ownership role. The company would have to use its resources to buy back the shares, which could affect its financial position.

The restrictions placed on Tom or the company under the proposed transaction would also depend on the specific terms of the buyback agreement. Generally, there may be restrictions on Tom in terms of competing with the company or disclosing confidential information, depending on the agreement. The company may also have restrictions on its financial resources due to the buyback.

If Tom were to consult for the company on an occasional basis after the buyback, it would not necessarily change the results of the transaction. However, it could have implications on the nature of their relationship and any ongoing responsibilities or restrictions for Tom. The specifics would need to be defined in an agreement between Tom and the company.