----- Original Message -----
Sent: Friday, June 20, 2003 11:12 AM
Subject: WSC Stock Transfer Policy
I agree that the WSC board should provide these
market services for current shareholders wishing to sell their shares and new
members wishing to buy shares.
I also agree that much of this process is good for
properly restricted shares which are purchased at a deep discount from
WSC. The $250 price certainly warrants limitations in
transferability.
Effectively, restricted shares can only be
transferred from the registered owner back to WSC. Restricted shares
cannot be sold or gifted even to family members or children. Restricted
shares cannot be passed to heirs in an estate. They cannot be transferred
in divorce settlements. These shares would simply go onto the "Stock Sales
Waiting List" for distribution. I am good with this for properly
restricted shares.
However, much of the policy presented by the
board is based on a false premise -- that all WSC shares issued carry a valid
and enforceable transfer restriction.
I believe that most WSC shares issued today do
not meet the requirements for a valid and enforceable transfer restriction and
that any attempt by the WSC Board to unilaterally impose such a restriction is a
breach of the boards duty to represent the interests of its stockholders.
Unrestricted stock may be sold, gifted, or willed
and must be transferred on the books of the corporation and reissued without
additional restrictions imposed by WSC.
I support evolving toward having our stock carry a
valid restriction. This must be done in an orderly manner and with the
consent of each shareholder. I will be most impressed when current board
members submit their shares to be reissued with proper restrictions
:-)
My comments on the May 24th policy are in italics
below.
Check my web page and follow "Leeward Boat" for
some hard facts about restrictions on stock. This will evolve. If
you have any questions about my position contact me.
Waccamaw Sailing Club Operating Procedures for Stock
Transfers:
The Club shall maintain two stock lists: (1) Stock Sales Waiting
List and (2) Stock Purchase Waiting List. The
lists will contain the names of persons who have identified themselves as
desiring to sell stock or as desiring to purchase stock.
OK. But these lists will need to be VERY
public to avoid ANY appearance of board shenanigans. Previous
boards do not have a long history of open and honest dealings with members or
shareholders! SUNSHINE
1. New members shall obtain stock through the Club. The
Club will purchase the needed stock from the Stock Sales Waiting
List to provide a market for those wishing to sell their shares.
If no stock is offered through the waiting list, then the Board will seek to
acquire non-member stock before Club stock is to be sold (ArtIX, Sec 3B).
The board should certainly provide this service where needed
but new members may acquire unrestricted stock from any source
whatever.
Shares issued by WSC through this process would be issued
with a valid restriction.
A prospective member may have acquired or be able to acquire
unrestricted shares through gift, inheritance, trade, or purchase.
2. Stockholders wishing to sell stock shall either deposit their
shares for sale with the Club in accordance with the Bylaws (ArtII, Sec 8),
along with their voting proxy to the Board, or retain possession of their shares
while requesting that their shares be sold. Shares received and held for
sale by the Club shall be acknowledged to owners in writing.
This could only be required for those share which carry a
valid and enforceable restriction.
I would expect that in consideration of the service provided
by WSC in making this market any shares sold under this process would be
reissued to the new owner with a valid restriction.
Most shares currently issued do not carry a valid
restriction. Anyone wishing to sell his unrestricted shares may chose to
use this convenient service but is under no obligation to do
so.
It is by offering convenient services such as this that
we will evolve to a restricted share base. Let's not try to steal these
rights from our current shareholders.
If I want to sell my shares for $500 how would this
sort?
And what's with the "voting proxy"? Would the board
claim voting rights on any proxies tendered? That would be
trouble! Why does the board want the proxies while the stock is still
privately owned?
3. Any stockholder receiving a bona fide offer to purchase
their shares shall give the Club right of first refusal to purchase.
Shares sold without the Club having the right of refusal will not be transferred
upon the Stock Registry of the Club (Art IX, Sec 4).
For properly restricted shares this is OK as WSC is the ONLY
market. You simply state that NO transfers will be permitted except
through WSC at the determined price or with WSC approval. This
would apply to gift shares, estate shares -- ALL transfers. No
right of first refusal is needed.
Most shares currently issued do not carry a valid and
enforceable restriction and must be transferred -- and transferred
between individuals without being burdened with any new
restriction. Otherwise this will
end up in court.
4. The Stock Sales Waiting List will contain
shares listed for sale. The priority order for sales from listed stock
shares will be:
a. Shares deposited with the Club for sale with a current
proxy designation will be sold first;
b. Shares held by members stockholders will be sold
second;
c. Shares held by non-member stockholders without proxy
will be sold third;
d. Shares held by the Club may be sold when no other stock
is listed (Art IX, Sec 3B).
OK. This must be a public
process.
5. The Club may purchase shares into the Treasury from time
to time based upon the availability of funds and/or Club's need for stock
shares.
OK, but see 6.
6. Club members in good standing may purchase additional
shares through the Club with priority given to members holding the lowest
numbers of shares waiting to purchase. The Stock Purchase Waiting
List will list members wishing to purchase additional stock.
Members on the list with the fewest shares will be given priority for additional
purchases, after new member needs for stock are met.
While I would like all active members to own 3-5 shares this
section is an administrative nightmare. Would you sell all treasury
shares to current members? Where would you place limits? This list
would need to be extra public to avoid the appearance of insider
mischief. Would you sell Mr X any more shares if his numbers came
up?
It should be made clear that any shares sold to member
shareholders would come from those shares placed on the Stock Sales
Waiting List only AFTER WSC has added shares to the
Treasury to meet several years of anticipated needs. The incentive here
is to shake unrestricted shares out of the hands of nonmember shareholders and
get restricted shares into the hands of our members.
Or just distribute the shareholders list to ALL our members
and let them find what they can at any price they can strike. Of course
these unrestricted shares would be reissued unrestricted!