Question

A bylaw of Betma Corporation provides that no shareholder can sell his shares unless he first offers them for sale to the corporation or its directors. The bylaw also states that this restriction shall be printed or stamped upon each stock certificate and shall bind all present or future owners or holders. Betma Corporation did not comply with this latter provision. Shaw, having knowledge of the bylaw restriction, nevertheless purchased twenty shares of the corporation’s stock from Rice, without having Rice first offer them for sale to the corporation or its directors. When Betma Corporation refused to effectuate a transfer of the shares to her, Shaw sued to compel a transfer and the issuance of a new certificate to her. What is the result? Explain.

Answer 1

Answer:

Betma Corporation will win the lawsuit

Explanation:

Betma Corporation has established that no shareholder may sell its shares unless it offers them for sale to the corporation or its directors, and has established that this restriction must be printed or stamped on each share certificate and this will be binding on all current or future owners or holders. Betma has established and complied with all these guidelines, and for this reason everyone is expected to comply as well.

However, Shaw did not abide by the guidelines set by Betma Corporation and bought shares that infringed what was set by Betma. Because Shaw has violated a legal guideline, Shawn will lose her lawsuit against Betma Corporation.