A right of first refusal gives the company and the other shareholders the opportunity to buy the shares before they are sold. This is how it works.
In Idaho, a corporation may be administratively dissolved by the Idaho Secretary of State for three reasons:
Failure to deliver an annual report by the date it is due;
Failure to have a registered agent for 60 days; and
Failure to let the Secretary of State know within 60 days that its registered agent has changed or resigned.
Idaho Code § 30-21-601. When the Secretary of State determines that one of the reasons for dissolution exists, it must give notice to the corporation. The notice may be hand delivered or mailed to the corporation’s office or registered agent. Idaho Code § 30-21-602(a). The corporation has 60 days to cure the problem. Id. If it does not, it is administratively dissolved.
After being administratively dissolved, the corporation continues to exist but it may not do any business other than “wind up its activities and affairs and liquidate its assets in the manner provided in its organic law or to apply for reinstatement under section 30-21-603, Idaho Code.” Idaho Code § 30-21-602(c).
A corporation that is administratively dissolved may apply for reinstatement within 10 years of being administratively dissolved. Idaho Code § 30-21-603(a). To be reinstated, the corporation must file an application that states the name, address, date of the administrative dissolution, and that the the issue has issue has been resolved. Idaho Code § 30-21-603(b).
If any fees, taxes, interest, or penalties are due, they must be paid before the corporation will be reinstated. Idaho Code § 30-21-603(c).
When a corporation is reinstated, the date of reinstatement “relates back to and takes effect as of the effective date of the administrative dissolution.” Idaho Code § 30-21-603(d). The corporation is treated as if it was never administratively dissolved. Id.
Deadlock in a closely held corporation stops a business in its tracks. Deadlock happens when a key decision can not be made because there is not enough votes to make the decision. This occurs most often in two situations.
Shareholders of closely held corporations should consider whether additional shares can be sold. A corporation is free to create and sell more stock unless there is something in writing saying it may not.
Shares in a closely held corporation are typically not marketable. Very few investors want to become a shareholder in a closely held corporation. This creates the problem of determining how a shareholder can get out of a closely held company at a fair price. One way to deal with this problem is a put right along with a right of first refusal.
Idaho Code allows the shareholders of a corporation to sign a shareholder agreement. Idaho Code § 30-29-732. A shareholder agreement may address many different aspects of corporate governance.