Mark Pestronk is a Washington-based lawyer specializing in travel law.
Q:I want to sell my agency and retire, but I am worried about some- thing: Although I own most of the
stock of my corporation, I have a few mi-
nority owners, including one long-time
employee, and they may not agree to go
along with the sale of the agency, or they
may try to hold out for a better deal for
themselves. Must they agree to the sale,
and if so, how can I get them to agree? If
it is not necessary for them to agree, then
what would I owe them once the sale goes
A:Whether you can legally sell the agency without the other owners’ consent depends on four factors:
(1) whether the sale will be a stock sale or
an asset sale; ( 2) whether the corporation
has any charter provisions dealing with
the subject; ( 3) whether there is a stockholders’ agreement among the owners;
and ( 4) what state your agency was incorporated in.
Let’s take the easiest scenario first: if
the buyer wants to do a stock purchase,
he will undoubtedly want to buy 100% of
the stock. In that case, you clearly need
the consent of all the stockholders.
The only exception would be the unusual case where there is a stockholders’ agreement containing a provision requiring the
minority owners to sell if the owner of the
majority of stock decides to do so. Such a
clause is called a “drag-along” right, since
the majority owner can require the other
owners to sell at the same time.
Not only is a drag-along clause unusual, but any sort of stockholders’ agreement at all is also unusual in a small
business. Although every lawyer advises
co-owners to have such an agreement, my
experience is that most co-owners never
get around to doing one.
If you don’t have such an agreement,
you may have to induce the other stockholders to go along by offering them a
premium for their shares or something
else that they want, such as an employment contract with the buyer.
Now, let’s assume that, as in most business acquisitions, the buyer wants to do
an asset purchase instead of a stock purchase. In that case, look to the corporation’s articles of incorporation, bylaws or
stockholders’ agreement to see what kind
of votes are required to approve major
decisions, such as the sale of the assets of
If your articles of incorporation do not
cover this subject, if you don’t have any
bylaws, if your bylaws do not cover this
issue or if you don’t have a stockholders’
agreement, you have to look to the corporation law of the state of incorporation of
your agency. For example, if your agency
is in Ohio but you are a Delaware corporation, you have to see what requirements
the Delaware corporation law imposes.
Under the Delaware law, a corporation’s assets can be sold if the holders of
more than half of the shares approve. If
some stockholders oppose the sale, you
need to be sure to follow all the proper
notice and quorum requirements for
meetings of the board or directors and
the stockholders; otherwise, you could be
vulnerable open to a court challenge of
On the other hand, if your corporation
was incorporated in Ohio, you would
have had to obtain the approval of the
owners of two-thirds of the stock.
Once you sell the assets of your agency,
you need to distribute the purchase price
in proportion to the stock ownership.
Even if you do so, a disappointed minority shareholder could still ask a court for
an appraisal, hoping to get more money.
To submit a question for Legal Briefs,
email Mark Pestronk at mark@pestronk
Does an agency sale require co-owners’ consent? It depends
24 TRAVEL WEEKLY SEPTEMBER 18, 2017
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Your right to sell
without the other
depends on four