Can I sell my company’s contracts to another company I own?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Can I sell my company’s contracts to another company I own?
I am 50/50 with my business partner in an S-corp, I am president he is the secretary. Our business relationship is not going well. As president can I sell any of the contracts we hold to a new company I am starting?
Asked on November 10, 2011 under Business Law, North Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
If, as president, you have the authority to sell or assign those contracts, then you could do so, with the following restrictions or considerations:
1) If the contracts themselves do not allow assignment, that is enforceable.
2) If the company's articles of incorporation or any operating agreement(s) bar transactions with owners or officers or entities owned by them, that is enforceable.
3) If you do not sell the contracts for their fair value, as if this were an "arms length" transaction with a third party, you will have breached your duties to the S-corp and you partner and could be sued by the company (e.g. by the partner, bringing a lawsuit on behalf of the company) or by your partner directly for this breach. Any sale must be fair to the S-corp to avoid potential liability. ("Fair" does not require top dollar; but it must be a deal you would have entered into with a third party).
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.