Share Transfers
Share transfer provisions are vital in regulating who can become a shareholder and under what conditions. Common restrictions include:
- Tag-Along Rights: If a majority shareholder gets approached to sell their shares, minority shareholders will have the right to join the transaction and sell their shares under the same terms. This protects minority shareholders from being left behind with less favourable conditions.
- Drag-Along Rights: Drag rights allow majority shareholders to compel minority shareholders to join in the sale of the company, ensuring that a prospective buyer can acquire 100% ownership if necessary.
Rules Around Raising Capital: Ensuring Equitable Growth
Shareholders’ agreements often outline specific rules regarding how and when additional capital can be raised, including:
- Pre-Emptive Rights: Pre-emptive rights allow shareholders to subscribe for new shares or purchase existing shares before any third parties. However, you might want to create some specified circumstances where these rights do not apply. For example, for agreed and anticipated rounds of raising capital.
- Capital Call Provisions: These clauses detail the process by which the company can request additional funds from shareholders, specifying the conditions and terms under which capital must be provided.
Questions?
Need assistance with crafting or navigating a complex shareholders’ agreement? Want to explore your options for maintaining control and stability in your growing business? Get in touch with our team for expert guidance.
This article is part of our series, "Shareholders’ Agreements: Your Business Toolkit," offering practical insights to strengthen your business foundation.
Read Part 1
Read Part 2
Read Part 3
