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In This Case, A Wrongful Termination Does Not Render Repurchase Wrongful

Shareholders' agreements in closely held corporations frequently grant the corporation and/or the other shareholders the right to repurchase a shareholder's shares if the shareholder ceases to be an employee of the company.  What happens if an employee is terminated, his shares are repurchased and it is subsequently determined that the employee was wrongfully terminated?

This is essentially what happened in Saw v. Avago Technologies, Ltd., 2020 Cal. App. LEXIS 641. The facts of the case are somewhat more complicated -  the repurchase agreement was governed by Singapore law and was between the plaintiff and the parent of the plaintiff's employer.  The Court of Appeal concluded that the parent did not breach the shareholders agreement by relying on an unlawful termination to repurchase his shares.  Although the Court of Appeal applied Singapore law, it does refer to Oracle Corp. v. Falotti, 319 F.3d 1106 (9th Cir. 2003) , in which the Ninth Circuit held that under California law, the terms of a stock option agreement must be given effect regardless of whether an employee was not given sufficient notice of termination under applicable foreign law.

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 197


About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...