- Jurisdiction
- California
Hi
My company is considering the acquisition of a small yet public (though no relevant trading has occurred for years) corporation based in CA.
The initial goal was to acquire the company but because the company's CEO owns about 2/3 of the issued shares we are now discussing buying out (all of) the CEO's shares.
Note that among the things we are interested with this purchase are business/customers and more importantly a few patents that the company owns.
Before things get more concrete and we go ahead and hire an attorney to help with the process/transaction, one thing caught my attention and I would like to kindly ask for advice.
The CEO has laid out basic terms for the transaction and basically gives his asking price for the 60+% shares AND the intellectual property. After checking every single patent, they are all owned by the corporation (the CEO does not own them personally). Is this something the CEO can do? The corporation has a small board of 3 directors (CEO + 2 executives in the corp).
From our standpoint it looks like the CEO would first need to somehow transfer the IP under his personal name, which would only be possible through a board of directors resolution. Doing this would substantially reduce the value of the corporation and it would have to be mentioned in the quarterly reports.
And regardless of whether it is even possible, this claim suggests wrongdoing or at least bad intentions on the part of the CEO.
The strategy being this acquisition so far makes sense from our standpoint but we pride ourselves in doing honest business; we neither want to harm shareholders (we suspect employees to be shareholders), nor do we want to proceed with something that is unlawful.
Thank you
EP21
My company is considering the acquisition of a small yet public (though no relevant trading has occurred for years) corporation based in CA.
The initial goal was to acquire the company but because the company's CEO owns about 2/3 of the issued shares we are now discussing buying out (all of) the CEO's shares.
Note that among the things we are interested with this purchase are business/customers and more importantly a few patents that the company owns.
Before things get more concrete and we go ahead and hire an attorney to help with the process/transaction, one thing caught my attention and I would like to kindly ask for advice.
The CEO has laid out basic terms for the transaction and basically gives his asking price for the 60+% shares AND the intellectual property. After checking every single patent, they are all owned by the corporation (the CEO does not own them personally). Is this something the CEO can do? The corporation has a small board of 3 directors (CEO + 2 executives in the corp).
From our standpoint it looks like the CEO would first need to somehow transfer the IP under his personal name, which would only be possible through a board of directors resolution. Doing this would substantially reduce the value of the corporation and it would have to be mentioned in the quarterly reports.
And regardless of whether it is even possible, this claim suggests wrongdoing or at least bad intentions on the part of the CEO.
The strategy being this acquisition so far makes sense from our standpoint but we pride ourselves in doing honest business; we neither want to harm shareholders (we suspect employees to be shareholders), nor do we want to proceed with something that is unlawful.
Thank you
EP21
