The Supreme Court of Virginia has upheld a restriction on transfer that provided that an employee’s ownership of shares ends immediately upon cessation of employment for any reason. In Barber v. VistaRMS, Inc., Barber was issued shares in VistaRMS apparently for no money consideration, presumably as part of his compensation as an employee. The shares were issued pursuant to agreements that made the shares nontransferable without the express written consent of the original shareholders. The agreements also provided that if Barber left the company’s employment for any reason his “ownership … shall immediately cease. In such an event, the shares … shall be reallocated in accordance with the terms” of certain agreements. Barber was terminated and about a year later learned that the management began discussions leading to the sale of the company to a third party. Barber sought inspection rights for the purpose of ascertaining the value of his shares in such a buyout. VistaRMS refused on the ground that Barber was not a shareholder. Barber sued for inspection.
Justice Koontz, speaking for a unanimous court, held the
restrictions on transfer enforceable and held that Barber was not a shareholder.
On those grounds the court denied inspection rights. Barber argued several
theories, but two are of interest. First, Barber argued that the restrictions
The forfeiture provision is clearly a restriction on
transfer and thus certainly comes within the ambit of the