One of the Directors of a property maintenance company has a piece of land for sale and the company would like to buy it from him. The land is thought to be worth between $80,000 and $100,000. Can they just make an offer for it?
Thanks for your help!
I am not a lawyer, but have an opinion that may be pertinent to this question. The purchase of a property from a mamber of the Board of a company, by the making and accepting of an offer, is a transaction in which a conflict of interest may exist. There is a strong possibility that the property will be sold at more than the true market value, thus enriching the Director by an excessive amount at the expense of shareholders. See
http://en.wikipedia.org/wiki/Conflict_of_interest
It may help if the value of the property is first accurately established by at least two independent appraisers and the owner-Director recuses himself or herself from the decision to make the offer.
thank you very much, this is very helpful!
To determine whether the property maintenance company can simply make an offer for the land, there are a few factors to consider:
1. Conflict of Interest: As one of the Directors is selling the land, it may be perceived as a conflict of interest. The company should evaluate whether corporate governance policies or legal regulations within their jurisdiction allow such transactions.
2. Corporate Bylaws or Shareholder Agreements: The property maintenance company's corporate bylaws or shareholder agreements may have specific provisions regarding related-party transactions. It is important to review these documents for any restrictions or requirements that would apply.
3. Independent Valuation: Given the potential conflict of interest, it is recommended to obtain an independent valuation of the land's worth. This will help ensure an objective assessment and determine a fair offer price within the estimated range of $80,000 to $100,000.
4. Board Approval: In many companies, decisions to acquire assets require board approval. The property maintenance company should follow its internal protocols and obtain the necessary approvals before proceeding with the purchase.
5. Legal and Financial Considerations: Engaging legal and financial professionals, such as lawyers and accountants, can provide guidance on any legal or financial ramifications associated with the transaction. They can help ensure compliance with applicable laws and regulations.
In summary, it is not as simple as making an offer for the land. The property maintenance company should carefully consider any conflicts of interest, review corporate bylaws or shareholder agreements, obtain an independent valuation, seek board approval, and consult legal and financial professionals to navigate the process appropriately.