What defines a statutory close corporation?

A statutory close corporation is characterized by restrictions on stock transfers, which is crucial for maintaining control and operational integrity within the company. These restrictions are often put in place to prevent unwanted outside influences from entering the corporation, thus ensuring that ownership remains closely held by a limited group of people, such as family members or close associates. This structure offers the flexibility of a corporation while allowing for a more informal management style compared to traditional corporations.

The significance of these restrictions lies in the intent to protect the interests of the shareholders who typically have a vested interest in keeping the corporation's management and operational strategies aligned with their goals. This is different from standard corporations where shares are often freely transferable, potentially leading to changes in management or control that may not align with the original vision of the founding shareholders.

Other characteristics, such as being a corporation with unlimited shareholders or one that operates in multiple states, do not apply specifically to statutory close corporations. Similarly, lacking formal management rules can occur in various business entities, but it is this intentional limitation on stock transfers that distinctly defines a statutory close corporation.