Article of Incorporation Provision - Shareholder Qualifications

Document Sample
Article of Incorporation Provision - Shareholder Qualifications Powered By Docstoc
					This is a provision to the Articles of Incorporation which provides certain qualifications
for shareholders of the corporation. If a potential shareholder fails to meet the
qualifications, he/she cannot purchase the shares. If a current shareholder later fails to
meet the qualifications, the provision provides a fair value selling mechanism. This form
contains both standard clauses as well as opportunities for customization to ensure that
the understandings of the parties are properly set forth. Use this form if a corporation
wants to limit the number of potential shareholders by requiring persons wishing to buy
stock meet certain qualifications, or if a company wants to maintain S Corporation
status.
       Article of Incorporation Provision - Qualifications for Shareholders


1. Qualifications for Shareholders.

    A. No person may be a shareholder of this Corporation unless and until such person meets
the following qualifications (“Qualifications”):

      i.   ___________ [Instruction: Insert Qualification]

     ii.   ___________ [Instruction: Insert Qualification]

[Comment: these Qualifications may be used to only have certain types of shareholders like
only holders of a specific type of license // primarily engaged in a specific type of business
or can be used to maintain S Corp Status like “residents of the state in which the primary
business of the Corporation is conducted”, or “persons or entities who are eligible to be
shareholders in a Corporation which has elected to be taxed as a S corporation for tax
purposes”]

    B. In the event that any shareholder no longer meets the Qualifications, the shareholder shall
sell and the Corporation shall purchase the shareholder’s shares within ninety (90) days of the
date that the shareholder fails to meet the Qualifications. The Corporation shall purchase the
shareholder’s shares at a price equal to the fair value of the shares. If the parties are unable to
agree on the price, each shall appoint an arbitrator. If the two arbitrators are unable to agree on a
price, the two arbitrators shall appoint a third arbitrator. The third arbitrator shall consult with the
other two arbitrators and make other determinations of fact as needed and shall thereupon
establish the price. The decision of the third arbitrator shall be final. Upon purchase or tender of
the purchase price, such person shall no longer be entitled to any right, privilege, or benefit as a
shareholder of the Corporation.

				
DOCUMENT INFO
Shared By:
Tags:
Stats:
views:157
posted:12/8/2011
language:English
pages:3
Description: This is a provision to the Articles of Incorporation which provides certain qualifications for shareholders of the corporation. If a potential shareholder fails to meet the qualifications, he/she cannot purchase the shares. If a current shareholder later fails to meet the qualifications, the provision provides a fair value selling mechanism. This form contains both standard clauses as well as opportunities for customization to ensure that the understandings of the parties are properly set forth. Use this form if a corporation wants to limit the number of potential shareholders by requiring persons wishing to buy stock meet certain qualifications, or if a company wants to maintain S Corporation status.