A shareholder contract (SHA) is a contract between the shareholders of a company and often the company itself. A SHA defines shareholder rights and obligations, regulates the management of the company, ownership of shares, privileges, votes and various guarantees for shareholders. A SHA aims to set rules for shareholders to anticipate issues that may become controversial in the future. THE SHS options give a shareholder the right, but not the obligation to resell its shares to the company (or other shareholders) at a time or at one or more events determined at a specified price or price determined by a predetermined formula. Investors who want to leave a business prematurely because it does not get certain income on a given date often need a put option. A put option may stipulate that a shareholder may resell all or part of his shares to the company (or other shareholders). With respect to put options, the remaining entity or shareholders may not be able to afford to buy back the shareholder who is conducting the sale. One way to mitigate this problem, if there is to be a put option, is to determine that payments can be made in increments, and until full payment, the sale shares are held in trust. In this case, it would be important to specify who will have linked the voting rights to Treuhand`s shares.
Many provisions can be adopted to prevent the transfer of shares to undesirable third parties (including competitors). In most cases, shareholder agreements require that share transfers be approved by the company and that they authorize existing shareholders to acquire the transferable shares. In the meantime, transfer restrictions generally do not apply when the beneficiary is a fully controlled partner, a family member of a shareholder or a trust. Common restrictions on share transfers include initial refusal rights, tag along and/or drag-along options. During our first working session or our call, we ask you to explain the context and what you consider to be the objective of the shareholders` pact. Important information includes the profile of the various members and the reason for their investment, the activities of the company and how it is financed (fundraising, shareholder loans, factoring, etc.). The Tag Along option is that when a shareholder intends to sell its shares to a third-party buyer, a Tag along option will allow other shareholders to “tagger” the sale, i.e. sell their own shares together to the same third-party buyer on the same terms.
This will ensure that the remaining shareholders (usually minority shareholders) can leave a shareholder (usually majority) under the same conditions in the event of good financial statements. A merger or takeover usually triggers a drag-along right, as buyers generally seek full control of a business. Drag-along rights help eliminate minority owners and allow the sale of 100% of a company`s securities to a potential acquirer. Drag along rights are supposed to protect the majority shareholder.