Shareholders' agreements
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Transcript of Shareholders' agreements
What is a Shareholders’ Agreement?
What happens if you do not have one?
What goes in one?
Practical considerations
What we will cover
An agreement between some or all of the
shareholders
Part of the constitution of the company
A private document
But is it needed?
What is a Shareholders’
Agreement?
Private Equity Investors
Angel Investors
Joint Venture Partners
Employee Shareholders
Founders
Who would want a Shareholders’
Agreement?
Wants to leave?
Wants to sell their shares?
Stops turning up for work?
Wants to sell out and the other does not?
Answer: Nothing
What happens if a shareholder
Question:
James and Bond set up in business. What
happens if James finds something more
interesting he wants his cash back and
works elsewhere?
Without
a shareholders’ agreement
Just and equitable winding up
Unfair prejudice claims
Derivative claims
Claim for breach of directors’ duties
What rights exist in law?
Restrictive covenants
Veto rights
Transfers of shares
Exit provisions
Deadlock provisions
With
shareholders’ agreement
Poaching of staff
Poaching of suppliers
Poaching of clients
Poaching of potential clients
Non-dealing
Restrictive covenants
Question:
David Niven has joined a competing business
taking key staff, clients and business plans. What
can you do?
Restrictive covenants
Question:
Daniel and Craig set up in business. Daniel
invests and Craig does not.
What veto rights should Daniel consider?
Veto rights
Borrowing money
Issuing new shares
Unusual transactions
Connected party transactions
Joint ventures and partnerships
Veto rights
Transfers of shares to be allowed at all?
Pre-emption rights (first refusal)
Compulsory transfers
Timing of payment for shares
Good leaver/bad leaver provisions
Transfer of shares
Share valuation provisions
willing buyer/willing seller
Discount for minority
Impact of shareholders leaving
Impact of share rights on valuation
Formula valuation
Valuation of shares
Question:
Roger wants to buy out Moore
How much does he have to pay?
Can he force a sale?
Valuation of shares
Drag along
Level of consent needed
Right to receive cash
Right to a cash alternative
Warranties and indemnities on the sale
No drag along below subscription price
Exit provisions
Tag along rights
Percentage level
Right to receive cash
Partial sales/co-sale rights
Exit provisions
Question:
Sean and Connery are directors and 50:50
shareholders. They cannot agree on
anything.
What happens?
Deadlock provisions
Agree who your solicitor is acting for
Costs
Agree heads of terms
Keep it simple
Get it finished!
Practical considerations
ANY QUESTIONS?
FUTURE TOPICS OF INTEREST
Visit www.gannons.co.uk for further information