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

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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

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 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.


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