Is offering different buy back prices based on years of service legal?

UPDATED: Aug 11, 2012

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Is offering different buy back prices based on years of service legal?

I have shares in a private company for which I worked. They are offering to buy back shares from all shareholders. However, they are offering different buyback prices per share from different shareholders based solely on the employees’ years of service with the company. Is this practice legal?

Asked on August 11, 2012 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

It is legal. If the shares are in a private company, they are presumably more-or-less illiquid; therefore the price is not determined objectively by the market but simply by what the company is willing to offer as its buyback number. Since there is a subjective component, the company may offer whatever price it wants. There is no law that says that the same price must be offered to all potential sellers, whether the thing being sold is stock, or automobiles, of clothing, or artwork, or services, etc. They can offer variable amounts; presumably, you could elect to not take the offer, or to try to negotiate a better price.

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 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.

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