What are involuntary share transfers?

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An involuntary share transfer in a North Carolina corporation refers to the transfer of shares of stock from one shareholder to another, without the shareholder’s consent or choice. Involuntary share transfers can occur for a variety of reasons, such as the death or incapacity of a shareholder, a court order or legal judgment, or the failure of a shareholder to meet certain obligations or requirements set forth in the corporation’s bylaws or shareholder agreement.

Some examples of situations that may result in involuntary share transfers include:

  • In the event of the death or incapacity of a shareholder, their shares may be transferred to their heirs or a designated beneficiary in accordance with their estate plan or applicable state law.
  • If a shareholder fails to pay their share of the corporation’s debts or obligations, their shares may be transferred to the corporation or to other shareholders as a means of offsetting the debt.
  • If a shareholder violates the corporation’s bylaws or shareholder agreement, they may be forced to transfer their shares to other shareholders or to the corporation as a penalty.

Involuntary share transfers in a North Carolina corporation are typically governed by state and federal securities laws, as well as any specific rules or procedures set forth in the corporation’s governing documents. It’s important for shareholders to be aware of the potential consequences of an involuntary share transfer and to consult with an attorney or financial advisor if they have any questions or concerns.

Will Blackton is a Raleigh-based attorney whose practice focuses on corporate transactional work. You can reach Will at wblackton@bobllaw.com or (919) 636-5979 ext. 1.

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