A buy-sell agreement is a business contract most commonly entered into by individuals shareholders and the corporation. In simple terms, a buy-sell agreement is primarily used to restrict the transferability of the shareholder's shares of stock in the corporation by providing for the purchase of the stock by the other shareholders or the corporation upon certain predetermined events (e.g., death of a shareholder, insolvency of a shareholder, disability, retirement, attempt by shareholder to sell stock to a third party). By limiting the transferability of stock, the corporation's existing shareholders ensure that they remain in control and restrict the ability of third parties to obtain stock without their approval.
Last week, it was reported that a San Diego corporation, Trovagene, Inc., fired and initiated business litigation against two of its executives - CEO Antonius Schuh and CFO Stephen Zaniboni. In that lawsuit, the corporation alleges that the two executives breached their fiduciary duties by usurping a corporate opportunity that should have been presented to the corporation, but was instead taken for the personal gain of the executives. Schuh and Zaniboni deny the allegation and released a statement claiming that "there are no merits to the actions the company has taken against us." Schuh has since stated that he plans to file a lawsuit against Trovagene for wrongful termination, which he expects Zaniboni to join. Unfortunately, this sequence of events is not uncommon when the relationship between a business and an executive sours.
While litigation and the courts are a great way to regain losses, potential clients should be prepared for a fight. Before any action is filed, an attorney should review the case to discuss what legal bases the client has for the claim, the client's likelihood of recovery, and the client's chances of prevailing. In addition to this, clients should consider several other factors before filing of the lawsuit.
When businesses become involved in a business dispute, and one of the parties is sued by the other it can become a huge distraction. There can be significant contingent liabilities associated with the dispute, and disruption in the work of the management team. It's important to immediately draw upon the experience and expertise of a proven business litigation law firm. At the Loftin Firm, we understand the complexities of business litigation, and will help to identify several potential strategies to resolve the dispute as efficiently as possible. Litigation is, by its very nature, the most expensive and time consuming option for all parties. We will work to help to establish common ground, negotiate resolutions to issues that avoid litigation, and guide you through alternatives such as mediation or arbitration. It will be important for you to bring this chapter in your business to a successful close. It will also be important for you to have the freedom to remain focused upon the business at hand and managing on-going operations.