closed corporation

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Closed corporation

A corporation whose shares are owned by just a few people, having no public market.

Closed Corporation

A company in which a small group of shareholders controls the majority of the shares. These majority shareholders tend to hold on to the company's stock, and, for that reason, only minority shares are traded, leading to light trade volume. Closed corporations are, by their nature, resistant to hostile takeovers and proxy wars. They tend to be more stable than other companies because their share prices are not determined by (sometimes irrational) investment decisions, but by the value of the company itself. However, closed corporations do not have access to as much working capital as corporations with more shareholders. They are also called closely held companies.

closed corporation

See closely held company.
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References in periodicals archive ?
because owners of closely held corporations are frequently linked by
Shareholder oppression and the new Louisiana Business Corporation Act
Courts impose fiduciary duties on shareholders of closely held corporations.
Fiduciary duties of shareholders of closely held corporations
Passive Activity Losses for Closely Held Corporations
Section 469
To operate under these relaxed rules, some states require that the corporation both qualify as a closely held corporation (typically fewer than 50 shareholders) and elect "statutory close corporate" status.
Corporate governance and maintaining the corporate veil
IN CASES INVOLVING DIVORCING SPOUSES WHO OWN closely held corporations, the courts have had conflicting opinions about the tax consequences to the spouses if the corporation, or one spouse, redeems the other's stock.
Avoiding third-party transfers in a divorce
Minority shareholders in a closely held corporation often are at a distinct disadvantage.
Valuing gifts of closely held stocks
The operation of most buy-sell agreements in closely held corporations is fairly straightforward.
Buy-sell agreements--an invaluable tool
The personal holding company (PHC) tax is a punitive tax imposed on certain closely held corporations that retain excess PHC income.
PHC tax and sec. 382
A trend is emerging in reasonable-compensation decisions that should please executives of closely held corporations and clear up some of the murkiness that has clouded this area for years.
Exacto Spring Corp. breaks new ground in reasonable compensation
Third, the seven-factor test invites the Tax Court to set itself up as a super-personnel department for closely held corporations, a role unsuitable for courts.
Seven-factor test for reasonable compensation was not valid
It was simply the bank's general policy to require personal guarantees on loans to closely held corporations.
S Shareholders Not Entitled to Increase Bases by Guarantee of Corporate Debt
Buy-sell agreements can benefit both surviving shareholders and a deceased shareholder's estate, by guaranteeing that stock in a closely held corporation will have buyers and will not be sold to outsiders.
Funding purchase of stock from deceased shareholder's estate or heirs with insurance

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