Small business owners who form a corporation often create shareholders’ agreements to govern their relationships, protect minority investors, and establish protocols for share transfers. These agreements are particularly common in family businesses or closely-held corporations with just a few shareholders. But what happens when these agreements don’t specify how long they remain in effect? In Texas, a little-known statutory provision can cause shareholders’ agreements to automatically expire after a decade. This “10-year rule” can create significant complications when shareholders attempt to enforce what they believe are still-valid agreements. This typically only applies to agreements entered into prior to September of…
Category: Buy-Sell Agreements
The Interplay of Buy-Sell & Non-Compete Terms
The intent of drafting business agreements is often to avoid disputes. One cannot always anticipate every type of dispute that can arise. This is where experience comes in, as some disputes are recurring and can be avoided. A buy-sell agreement that is not coordinated with the terms of a non-compete agreement is an example. This type of dispute often leads to disputes between partners. The recent Bihner v. Bihner Chen Eng’g, No. 01-21-00086-CV (Tex. App.–Houston [11th Dist.] 2021) case provides an opportunity to consider this issue. Facts & Procedural History This case involves a Texas limited partnership formed by a…
