Fort Worth, TX asked in Contracts, Banking and Securities Law for New York

Q: Can you purchase shares of a private Company on the Secondary Market but NOT disclose the purchase to the Company?

In other words, does the Seller of the shares have to disclose the sale to the Company, inclusive of who the Buyer is?

1 Lawyer Answer
Mathew Paulose Jr.
Mathew Paulose Jr.
  • Business Law Lawyer
  • Bronxville, NY
  • Licensed in New York

A: Greetings. It appears you would like to purchase shares of a non-public company. A purchaser who meets the SEC definition of a qualified purchaser may buy shares of a non-public company. Often brokers are required to facilitate the purchase. Due diligence is also required. During the due diligence process, certain information would be reviewed, such as stock sale restrictions or protections. These may include a "right of first refusal" giving the non-public company the right to first purchase the stock before the investing purchaser. If such restrictions do not exist, then the purchaser is free to buy the shares. All purchasers should want their purchases recorded with the company to ensure their shareholder rights. Please contact a good New York lawyer for further information.

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