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Pinstripe Corporation is a closely-held corporation with 9 shareholders. Aaron wants to sell his shares to...

Pinstripe Corporation is a closely-held corporation with 9 shareholders. Aaron wants to sell his shares to Pete, who works for a rival company. Why would this make the other shareholders of Pinstripe Corporation nervous? Is there anything they could’ve done to prevent it?

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Answer #1

Other shareholders will become nervous because incoming shareholder is from rival Company it is possible that he may divulge trade secrets of Pinstripe Corporation to its rival Company which can result in huge loss to Pinstripe.

Shareholders of Pinstripe should enter into buy sell agreement. It is an agreement which places restriction on disposition of share when a shareholder leaves comany. In this agreement shareholder who wants to sell his shares must offer his shares firstly to remaining shareholders & remaining shareholders don't purchase than he should offer to the company & if company also don't purchase than to third party.

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