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(d) ClosingIf the sale is approved by the shareholders, the sale can be consummated as contemplated by the definitive agre...
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Legal Steps Required To Sell A Colorado Corporation

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Obtaining shareholder approval for a sale transaction requires several technical steps that must be considered by the board and management. The board and management must understand that these steps should be considered early in the process to keep the deal momentum moving. Also, as this post is in summary form, numerous other issues would likely arise in such a transaction.

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Transcript of "Legal Steps Required To Sell A Colorado Corporation"

  1. 1. http://biztaxbuzz.com/bizlaw/legal-steps-required-to-sell-a-colorado-corporation/ June 3, 2013Legal Steps Required to Sell a Colorado CorporationBizTaxBuzz by Trevor Crow3rdJuneLegal Steps Required to Sell a Colorado CorporationPosted by Trevor CrowIn general, a Colorado corporation may sell all of its assets on the terms and conditions and for theconsideration determined by the Board of Directors, provided that the Board proposes and the shareholders approve the transaction.There are several steps that a corporation must follow to complete the transaction:(a) Required Board ActionDefinitive Agreement. Initially, the company must negotiate and come to terms on a definitive agreement regarding the proposed sale. Aspart of these negotiations, the company must determine whether the transaction will qualify as a tax-free reorganization.Board Approval. When a definitive agreement is reached, the Board is required to consider and vote upon the transaction and issue boardresolutions documenting this decision.Recommendation. If the Board approves the transaction, it must make a recommendation to the shareholders, unless the Boarddetermines that, because of a conflict of interest or other special circumstances, it should make no recommendation, in which case theBoard must communicate the basis for its determination to the shareholders with the submission of the transaction.Notice of Meeting/Proxy Statement. In addition to the Board recommendation, the company must give notice to each shareholder of themeeting at which the shareholders will vote upon the transaction. This notice must state that the purpose, or one of the purposes, of themeeting is to consider a sale of all of the property of the corporation and must contain, or be accompanied by, a description of thetransaction. This notice and description typically takes the form of a proxy statement.Time for Notice. Generally, the company’s bylaws provide the advanced notice requirements for meetings.Dissenter’s Rights. A sale of all of a company’s assets creates dissenters’ rights under Colorado law (C.R.S. § 7-113-102(1)(c)). Thus, thenotice of the meeting must include additional material regarding the shareholders’ right to dissent. This must be given to all shareholdersregardless of whether they are entitled to vote on the transaction or not.(b) Required Shareholder ActionVote Required. Unless the board requires a greater vote, the transaction must be approved by each voting group entitled to voteseparately on the transaction by a majority of all votes entitled to be cast on the transaction by the voting group.(c) Dissenter’s RightsShareholder’s Exercise. Shareholders may seek to enforce their dissenters’ rights by following the statutory procedures and timeframes.(C.R.S. § 7-113-202 and C.R.S. § 7-113-204)Payment for shares. If a shareholder exercises his dissenter’s rights in accordance with the statutes, the shareholder is entitled to obtainpayment for his shares, in cash, based on the fair market value of such shares.
  2. 2. (d) ClosingIf the sale is approved by the shareholders, the sale can be consummated as contemplated by the definitive agreement.If the sale is consummated as a tax-free reorganization, a form should be filed with the IRS to evidence the transaction.Bottom Line. Obtaining shareholder approval for a sale transaction requires several technical steps that must be considered by the boardand management. The board and management must understand that these steps should be considered early in the process to keep thedeal momentum moving. Also, as this post is in summary form, numerous other issues would likely arise in such a transaction.

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