Many corporations with more than one owner have made no provision for the inevitable: dissolution, divorce or death of an owner. The legal complications that arise when these occur can be staggering and the cost of dealing with them can destroy the corporation.

A simple alternative is a stock agreement between the individual stockholders or between the corporation and its stockholders. These agreements set out specifically what happens to a stockholders’ shares if there is a disagreement which prevents the corporation from continuing to operate,  the death of one of the stockholders, or an attempt by one of the stockholders to sell their interest. The remaining shareholders may want to give the corporation or themselves the right of first refusal of shares to prevent a newcomer from joining the corporation or controlling a block of its stock.

It’s easy to be caught up in the excitement of starting a new venture and not consider the unpleasant possibilities. But a little time and energy spent on preparation can prevent effects which destroy the corporate goodwill its owners have worked hard to create. And stock agreements drafted now can allow shareholders to decide on a fair way to value the shares so that the rights of all stockholders are protected.

Mike Hrabal has been involved in litigation resulting from the failure to plan for business changes. You can use his experience to decrease the harmful effects of future changes and problems on your corporation. As the old adage goes, “An ounce of prevention is worth a pound of cure.”