Does my business partner have the right to rescind a gift of stock?

Full Question:

My business partner (relative) gifted a friend 7% of our fledgling business about 1 year ago just because she was a friend who was supportive of her. Our company is a LLC. We have made no money in the 2 years of operation. Now my partner/relative realizes she needs that percentage to maintain her majority control of the business as well as being able to obtain financial investors. My partner has told her friend she has rescinded the gift. Note her friend never received any benefit from the gift because the business has made none. However, her friend refuses to accept my partner has rescinded the gift. She threatens to take both of us to court which is ridiculous since the business has made nothing. Does my partner have the legal right to rescind this percentage gift or will it be necessary to go to court to have this done? Again, please keep in mind this is only a start up business and there is only debt and inventory that has gone nowhere.
12/16/2008   |   Category: Donations ยป Gifts   |   State: New Jersey   |   #14817

Answer:

I am prohibited from giving a legal opinion. This service provides information of a general legal nature. The answer will depend on all the facts and circumstances involved. Three elements are required to determine whether a valid, enforceable gift was made: delivery, donative intent, and acceptance by the donee.

Delivery of a gift is complete when it is made directly to the donee, or to a third party on the donee's behalf. In the event that the third person is the donor's agent, bailee, or trustee, delivery is complete only when such person actually hands the property over to the donee.

A delivery may be actual, implied, or symbolic, as long as some affirmative act takes place. If, for example, the symbolic delivery of a car as a gift can take place when the donor hands the keys over to the donee. Delivery can only occur when the donor surrenders control of the property. For example, an individual who tells another he intends to make a gift of a car to another but continues to drive the car whenever he wishes has not surrendered control of the car.

Donative intent to make a gift is primarily determined by the donor's words, but the courts also consider the surrounding circumstances, the relationship of the parties, the size of the gift in relation to the amount of the donor's property as a whole, and the behavior of the donor toward the property subsequent to the purported gift.

The final requirement for a valid gift is acceptance, which means that the donee unconditionally agrees to take the gift. It is necessary for the donee to agree at the same time the delivery is made. The gift can, however, be revoked at any time prior to acceptance. However, in some cases the court will set aside an otherwise valid gift if there is evidence that the donor was defrauded by the donee, coerced to make the gift, or strongly influenced in an unfair manner. I suggest you contact a local attorney who can review all the facts and documents involved.