At 09:19 PM 3/25/98, Michael wrote: > >What if the departing member wants x number of shares of a high performing >stock and the other members want to transfer x # of shares of a mediocre >stock??? > >Does the club need to vote on which stock will be reduced to satisfy this >obligation??? >
Clearly the answer to the second question is YES. Most club partership agreements probably state this explicitly; if not, then the general partnership rules on voting re management issues will be in effect by default. (The difference is that is that where it's made explicit, the wording is generally that the REMAINING partners get to make the choice of "whether" and "which" for a payout in the form of stocks vs. cash.) As a practical matter, however, IMO it is generally advisiable that the remaining and withdrawing partners arrive at a mutually agreeable stock to be transferred, if that's the mode of choice. It can take an aggravatingly long time for a stock to be actually transferred from the club's name to that of someone else. What happens if a stock valued at $10,000 as of the "official valuation date for withdrawal" has a market price fo $9,500 by the time the withdrawing partner becomes aware that it is now in his possession? If he/she feels abused about the choice of the stock in question, I believe there is a good probability that he/she (perhaps with counsel, depending on the dollar amount and the vibes of the situation) come back to the club and say "You were contractually obligated to pay me $10,000, you still owe me $500." (A position that as a layman I believe has great merit.) However, if the stock is a stock that the withdrawing member wants to hold for the long term, he/she would likely feel that any such change was just part of the normal price fluctuations inherent in stocks, and be happy. My 0.02 Douglas Dame -- MOLIC worldwide -- Interlachen FL
