Exit Options In Shareholders Agreement

The pre-purchase clauses in the transfer of shares, provided they are included in the company`s by-law, require a shareholder to transfer his shares, inform other shareholders of all the details of the offer of the potential purchaser and put his shares on sale to other shareholders who have priority when buying the shares offered. If existing shareholders refuse to acquire the shares, the shares in question may be offered to potential third-party purchasers. With your list of contingencies, consider the impact of each shareholder`s position on value, but also on other reasons they might have for the shareholder position. A good way to do this is to use a shareholder pact that already considers many of these issues as ancillary briefs to be discussed. The difference between the tag along and drag-along provisions is that the former grants minority shareholders the right to decide whether they wish to participate in a sale by protecting their own interests. A drag-along system results in a sale obligation for minority shareholders, which is why it is generally a provision negotiated by majority shareholders in a shareholders` pact. In both cases, the conditions and timing of the sale are the same, which maintains shareholder balance and equality. While the rights are primarily intended to protect the withdrawal rights of majority shareholders, the rights primarily offer the protection of minority shareholders. If a shareholder wishes to leave the company but there is no buyer for his shares, it may be reasonable for a shareholder to return his shares to the company without consideration, i.e. to return the shares to the company.

A share donation should be approved by the Board of Directors. If the company that received the gifted shares does not intend to transfer them to a third party, the shares sold to a company are generally cancelled. This clause may require other shareholders to sell their shares to other shareholders (hereinafter the appeal option) or to acquire shares of other shareholders (hereafter the put option). You can`t set firm rules about how the company will run its course, but you can agree that you will actively seek an exit in a given time scale. For example, you can choose: but there is a problem. It is difficult to find a third party who buys at real market value. No buyer aware of ROFR`s maturity would spend their time seriously considering the agreement, as there is a good chance that other shareholders will use their rights and have wasted their time. But not talking to the buyer about ROFR, i.e. negotiating in good faith, probably won`t lead to the buyer offering real value. If you want to get out of a shareholders` pact, you should carefully read the Put/Call option – in many shareholder contracts, the “call” option means that the shares must be sold at a certain price, while the call options may include discounts for existing shareholders. It should be noted that rights throughout the day do not need to be called by minority shareholders.

Therefore, if there is a clause, but no drag-along clause, minority shareholders may refuse to sell their shares (even if it may be to their detriment). Such clauses should be carefully drafted and clearly worded, as they are seen as hard-working means. The implementation of such a clause is only applied if the clause is triggered in accordance with the terms of the shareholders` pact. Once this offer has been made, it cannot be revoked or modified, it is an automatic trigger of the clause and will be forced if the offer is made correctly. A drag-along plan allows a shareholder of the company (usually a majority shareholder) to compel other shareholders to accept an offer from a third party to acquire the entire share capital of the company if the majority shareholder has accepted an offer made on the same terms.