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LSDefine

Simple English definitions for legal terms

closely held corporation

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A quick definition of closely held corporation:

A closely held corporation is a type of company that is owned by a small group of people, usually family members. The shares of this company are not sold on the stock market. The owners of a closely held corporation have a special duty to be fair and honest with each other. This means they should not do anything that would harm the other owners. Sometimes, the owners of a closely held corporation have rules about how shares can be sold or transferred. If a minority owner feels they have been treated unfairly, they can take legal action against the other owners.

A more thorough explanation:

A closely held corporation is a type of company that is owned by a small group of people, usually family members or close friends. Unlike other corporations, the shares of a closely held corporation are not traded on the stock market. This means that the owners have more control over the company and its decisions.

Because there are only a few owners, the actions of each shareholder can have a big impact on the company. This is why shareholders in a closely held corporation have a special duty to act in good faith and not harm the other shareholders. For example, if a shareholder sells their shares for personal gain, knowing that it will hurt the company and the other shareholders, they could be breaking this duty.

Transferring ownership of a closely held corporation is also different from other companies. The owners often have agreements in place that restrict how and to whom shares can be sold or transferred. This helps keep ownership within the select group of people who started the company or are close to them.

If a minority shareholder in a closely held corporation feels that another shareholder has harmed them or the company, they can file a direct lawsuit against that shareholder. This is different from other corporations, where such lawsuits are usually brought as a shareholder-derivative suit. This exception is made because in closely held corporations, the majority shareholders may unfairly benefit from derivative suits.

For example, imagine a family starts a closely held corporation together. One of the siblings decides to sell their shares to an outsider, even though they know it will hurt the company and the other siblings. The other siblings could file a direct lawsuit against the sibling who sold their shares, claiming that they breached their duty to act in good faith and not harm the other shareholders.

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haha suckers!!!!!!!!!!!!!!!!!
20:38
prolly have a lil family and hobbies what loosers
hahah losers like what? you travel? have a life? not me, i'm reading every line of a contract while my seniors go play golf and enjoy like hahaha suckers
20:40
yea inverse perspective, what is fun is not fun and what is not fun is fun
20:40
you get it.
i wanna be able to travel a ton too
my ex just posted a harry potter related joke i think i dodged a bullet
20:41
Im only going to law school to recruit members for the revolution
20:41
nice where u wanna go? yea bullet dodged fr
can we join even if we're not at ur school
20:44
yeah but youd be in a different chapter
20:44
are we revolting against people who do not use their signal whilst driving?
20:44
We’re revolting against the man, man
20:45
Power does not flow from the sleeve of a judges robe to paraphrase
fuck yeah i'm down
MrThickRopes
20:46
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MrThickRopes
20:46
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MrThickRopes
20:46
PUT DA BEAT ON BRUH
20:48
Aight yall can join but I call dibs on being assassinated
MrThickRopes
20:49
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MrThickRopes
20:49
Up in da club
MrThickRopes
20:49
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the unction
20:55
just got a DUI while drinkin an NA beer in my car
20:55
someone help is some1 a hoya lowya here?!
MrThickRopes
21:03
Yoooo wtf
21:03
jk ropes but I do got ops fr
MrThickRopes
21:12
Me too bruh they praying on my downfall fr
21:19
bruh i got ppl tryna make my head a brain smoothie
21:19
serve me with some margarita mix and agave sweetener and summ
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