(Solved Homework): Joseph and Erica, husband and wife, jointly own all of the stock in Velvet Corporation. The two are currently involved…

Joseph and Erica, husband and wife, jointly own all of the stock in Velvet Corporation. The two are currently involved in divorce proceedings, and pursuant to those negotiations, they have agreed that only one of them will remain a shareholder in Velvet after the divorce. Because Erica has been more involved in Velvet’s management and operations over the years, the parties have agreed that Joseph’s ownership should be acquired by either Erica or Velvet.

What issues should be considered in determining whether Erica or Velvet should acquire Joseph’s shares in the corporation

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Solution) There are many issues need to be considered in determining this acquisition of share whether by Erica or velvet. First and foremost issue related with this is that calculation of purchase consideration. purchase consideration refers to the amount of consideration to be paid for the purchase of shares of Joseph.For determining the purchase consideration, first, there is need of determining the valuation of shares of the company. There are so many different methods for such valuation of shares. Selecting the appropriate method of valuation is need of an hour as wrong selection may lead to disputes among members. Proper settlement of purchase consideration should be there before the acquisition process starts. Another issue needs to consider is the valuation of goodwill as the companies share are being acquired by Erica or Velvet. So that the Joseph should get the proper value of his share of goodwill which he has earned by serving long tenure in the company.

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