One Simple Way to Transfer Ownership: Share Redemption
Aug 16, 2010
Bloomington Harvesters, Inc., is a family corporation that custom harvests grain up and down the Midwest. They start in the South early in the summer and end up in Canada in late September. John is a co-owner and head of the family. John’s son Drew is just starting his third season managing a crew. He’s gradually assumed more responsibility and acted with an owner’s resolve to address challenges. John wants to transfer a controlling ownership interest in the operation to Drew.
John owns 70% of Bloomington Harvesters and Drew owns the remaining 30%. Though he’s worked there a while, Drew does not have the capital to purchase the 21% necessary to gain a controlling interest. John may consider allowing the corporation to redeem his shares.
Redeeming John’s shares will effectively transfer ownership control to Drew, even though none of the stock is transferred directly to him. A redemption reduces the number of shares outstanding and increases the respective value of each outstanding share.
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