Interested in training for your team? Click here to learn more

Partial Liquidity Transactions for Middle Market Companies: Structuring Alternatives; Legal, Tax, and Governance Issues

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, May 3, 2022

Recorded event now available

or call 1-800-926-7926

This CLE course will examine the mechanics of partial liquidity transactions in middle market companies. The panel will discuss the structuring and pricing alternatives and the legal and tax issues associated with each. The panel will also discuss governance issues, including the fiduciary duties of board members and key shareholders.


Middle market companies have often decided to remain private, but still need options for liquidity events. For companies that remain private, partial liquidity transactions can provide liquidity to key employees and investors while allowing venture capital, private equity and other investors to invest in a successful middle markets company.

Before proceeding with the secondary sale of existing shares, the company must consider whether the deal is structured as a third-party purchase or a repurchase of shares by the company, how to price such sales, and who should be eligible to sell their shares or options. The company must also look at existing transfer restrictions, such as rights of first refusal or more stringent restrictions.

If the company elects to pursue a transaction with multiple potential sellers, such sale may be deemed a tender offer and subject to securities law regulations governing tender offers. In addition, boards of directors must consider their fiduciary duties to all stockholders in conducting these transactions.

There are significant tax issues associated with secondary sales. The sale could result in short-term or long-term capital gain or in ordinary income, depending in part, on the identity of the purchaser and the purchase price as compared to the fair market value (FMV) of the shares based on the company's latest Section 409A valuation--and in some circumstances, may subject the company to withholding obligations.

Listen as our interdisciplinary panel discusses the structuring, legal, governance, and tax issues associated with partial liquidity transactions.



  1. Middle market companies and the need for partial liquidity: initial issues to consider
  2. Structuring a secondary sale
    1. Company repurchase of shares vs. third-party purchases
    2. Who will be eligible to sell their shares/options and how much can they sell
    3. Pricing
    4. Transfer restrictions, rights of first refusal
  3. Documentation; key provisions
  4. Securities compliance
    1. When a secondary sale might be deemed a tender offer
    2. Conducting/documenting a tender offer
    3. Disclosure Issues
  5. Board fiduciary duties
  6. Tax ramifications of a secondary sale--capital gains, 409A, and ordinary income


The panel will review these and other critical issues:

  • What factors might discourage a company from facilitating a secondary sale or other partial liquidity events?
  • What are the advantages and disadvantages of a company repurchase of shares vs. a third-party purchase?
  • When is an offer or purchase of securities deemed a tender offer, and what is the tender offer process?
  • How do pricing and structure affect the tax treatment of the sale for the shareholder? The company?


Brown, Molly
Molly Z. Brown

Of Counsel
Brouse McDowell

Ms. Brown’s practice focuses on public and private securities offerings, mergers and acquisitions, corporate...  |  Read More

Murthy, Arjun
Arjun Murthy

Cascade Partners

Mr. Murthy brings nearly a decade of investment banking, corporate finance and operational experience to the firm. His...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video