Worthless Grade B Stock

[ZoomnFinancial]

A client of mine had a failed business venture. Client was a single member LLC that held all the grade A stock. They had a number of investors that held grade B stock. If the venture would have succeeded, they would have all been paid back with interest. Client negotiated the interest to be different with each investor. Payments would have begun after 18 months, but venture closed long before that could happen.

Does the client have to send anything to the Grade B stock holders saying investment is worthless?

Thank you for any information. This one is new to me.

[Mr. Pencil]

grade B stock... would have all been paid back with interest

Sounds more like creditor/lenders than stockholders. I would recommend talking to a lawyer before sending any letters to other investors.

[kcjenkins]

Good advice. I'd say NO LETTER from him would be the safe choice. Let any communication come from his attorney, if he does not want to open himself to possible legal problems. The larger the amounts involved, of course, the more caution that should be used. But, speaking in general, when a corp goes under, they do not send stockholders anything, unless they file bankruptcy, in which case it's the trustee that sends a notice.