Right of First Refusal Resolution - By David Gass

After you form your corporation, make sure to call and organize regular shareholder and director meetings, as well as document important corporate decisions, for example a agreement to shield the company stock. Otherwise, the courts and the IRS might decide that your business doesn't qualify as a corporation.

Holding corporate meetings and keeping up with resolutions is fundamental to why you formed a corporation. Appropriate and timely corporate resolutions help protect the personal assets of owners and officers.

A Right of First Refusal Agreement is an agreement that requires shareholders wishing to sell shares to give the corporation the first priority right on purchasing their shares. You should think about entering into a Right of First Refusal Agreement with the shareholders of a your corporation for two important reasons:

• Maintain control over your corporation
• Keep your corporation's shares in friendly hands

This agreement may also be drafted to include the option or commitment of your corporation to buy back shares from a shareholder who has died, become permanently disabled, or is no longer involved with the corporation either as a director or employee.

The agreement normally requires the person exercising the right of first refusal to purchase on the same terms as the terms on which the buyer would have purchased the stock.

Rights of first refusal are very common in shareholder agreements in close corporations. Typically, the would be seller is obliged notify the corporation and his fellow shareholders of the terms of the proposed sale. Some rights of first refusal allow the corporation its shareholders to purchase the would be seller's stock at book value.

Book value is likely to be far less than fair market value, of course, given its focus on historical cost and disregard of going concern values. Because book value thus is almost positive to be much lower than the price an otherwise willing buyer likely would pay, such a provision halts outsiders from bidding.

Corporate Resolutions, Bylaws, Company Minutes and Stock Ledger information maintained properly are vital to the continued success and existence of a corporation. They are the unfailing protection of the company directors and shareholders.

As a general rule all records, resolutions and recorded minutes of your corporation should be kept for a period of no less than six years.

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