When we think of levying assets to satisfy a judgment we often think of things like cars and real property. A category of assets which are often ignored are business interests held by a Debtor. Most of the time those interests are either shares in a closely held corporation or an interest in a limited liability company. This post will deal with shares of stock.
Levying Debtor’s Shares in a Closely Held Corporation
In the situation where you might have a judgment against an individual (or entity) which owns shares in a cash flowing corporation, you have a potentially valuable asset. In our example let us assume Debtor (an individual) owns a 45% interest (non-controlling) in a Florida corporation that owns and manages luxury rental properties. Debtor refuses to pay the judgment but has no other tangible non-exempt assets (e.g. leases his car, rents his home or owns the home and bank accounts with his wife as tenants by the entireties, etc.). All hope is not lost however, as the Debtor owns these shares and you have searched the Florida Secretary of State Division of Corporations (www.sunbiz.org) and the corporate records tell you exactly the extent of that ownership.
Needle in a Haystack
These shares are absolutely subject to execution to satisfy the judgment of Creditor. The levy and sale of corporate stock on execution by a judgment creditor is specifically authorized by statute. See Fla. Stat. § 56.061. The statute states in relevant part “Lands and tenements, goods and chattels, equities of redemption in real and personal property, and stock in corporations, shall be subject to levy and sale under execution.” Id. As a practical matter however, the sheriff will not levy on shares as they are too difficult to locate. Often the “shares” in a closely held corporation have not been physically produced or in the rare event they have been they could be located anywhere (needle in a haystack). The workaround solution is that virtually every sheriff in the state of Florida requires Creditor to get a court order that either 1) compels the debtor to produce shares if they are in existence or 2) make the debtor (or company) actually issue those physical shares. I will warn you often you have to follow up such motions with motions to compel, but in our practice, we’ve found this stratagem as a good tool to produce a settlement (or obtaining the asset outright).
Conclusion
It should be noted, that while we are talking about shares of stock in a closely held business the debtor may draw income from, Fla. Stat. 56.061 also applies to actually shares of stock which may be traded on a stock exchange (e.g. Disney, Coca-Cola, etc.). Those are valuable assets subject to execution, however Fla. Stat. 56.061 still has not caught up to the age we are living in, if your Debtor owns assets such as this they are so easily transferrable Creditor would probably have to avail themselves of Fla. Stat. 56.29 to gain some sort of injunctive relief to levy assets such as this in today’s modern age (where one can dispose of stocks by just going online). If you have questions about levying stock, please contact our firm today.