How are shares in an incorporated company handled in a personal bankruptcy? I’d like to know how personal bankruptcy works regarding an incorporated company.
I’m holding 60% of the shares and my partner has 40%. Due to some financial difficulty, he is thinking of personal bankruptcy.
How is personal bankruptcy going to affect our company? Does it mean we have to give him 40% worth of the company to him when he files personal bankruptcy?
Thanks in advance.
The trustee in your partner’s bankruptcy will value the shares and is obligated to realize on the fair market value of the shares.
It is common that for a small, low-profit company earning the equivalent of “wages” that the company will have no value.
If the shares have value the trustee will first look to you to purchase your partner’s shares.
Yours truly,
Earl Sands
Licensed Insolvency Trustee