The problem in the chain of ownership

Vlad M. (his real name was changed to preserve the confidentiality of the client) bought a marble floor business. The founder of the business was an immigrant from Greece who opened this company in the United States many years ago.

Since the founder left this business, it has changed owners several times. A large Greek family quarreled over it, then reconciled, and so on in a circle.

By the closing day, eight generations of business owners had changed. Vlad had an unpleasant surprise when he discovered that some share certificates were missing. This meant only one thing: some of the previous owners hadn`t formalized the sale of their property.

Vlad's mood soured even more when he found out that the owner of the business share with no certificates had died eight years ago.

The problem is that almost always owners don`t understand corporate law. They only have illusions about how property rights can be formalized.

They also hate paperwork, although this is still half the trouble.

The Immigration Service looks especially closely at these documents because they are looking for any reason to refuse a visa or green card. Errors are often found there.

You can get into this situation when you make a deal with someone who is de jure not considered to be the owner. Then your purchase will not be considered an immigration-eligible company.

In any case, we advise you to submit the documents for verification to a lawyer who understands corporate law and all the details of the correct execution of documents.

What you need to pay attention to:

  1. The real list of owners. The person who thinks he is the owner may not be the owner. The company can be owned by relatives, for example.
  2. If the business has several owners, each should be asked a question: does he agree to the deal. If one of the owners is married, then the spouses shouldn`t be against the sale of the share. If the spouses are divorced or at a stage of divorce, then later the transaction can be declared null and void in court.

There is a concept - chains of ownership. It is important to make sure that all stages of the hand-to-hand transfer of the business are properly completed. You cannot check it without the help of a lawyer, because often all documents could be drawn up improperly.

  1. It is necessary to analyze the by-law charter for a subject that indicates the restriction of the rights of the company`s head. The L-1 visa requires unrestricted supervision by the supervisor. Some businesses don`t qualify for this requirement under the terms of the acquisition. Read more about the L-1 visa in our article.

All found errors should be in the list, which is passed to the owner. Eliminating them is a condition for closing the deal. On the closing day, you need to check it again. If the issues are not fixed, the owner’s behavior will have two scenarios. Some will say: "I will do everything; I will change everything." Others may resist and say that they will not do anything.

To avoid pressure on you and to end the negotiations successfully, you should study the CLASS Negotiating.

A business broker can also help you avoid pressure during negotiations. Read more about the role of a business broker in the process of buying a business in the article "Business Buyer and Business Broker".


Проверка корпоративных документов на что обращать внимание 3

  • Violation of the chain of ownership is one of the most common reasons for refusal of a work visa and green card.
  • A lawyer who understands corporate law should check the availability of documents and the cleanliness of registration. Learn more about the help of professionals in verification in our article "Who checks a business".
  • Correcting these inconsistencies is far more likely to be done before the deal is closed. You need to make every effort to get the seller to do this or keep the money in the escrow account until everything is put in order.

Take a quick look at our Business Due Diligence class to be fully equipped when it comes time to review employees.

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