Fund Manager Shareholders Agreement

If a group of shareholders wishes to sell its shares, which constitute a majority of shares, minority shareholders should have the right to participate, i.e. to include their shares in a sale to outsiders. There is no substitute for good corporate governance. Even small businesses with few shareholders are better served by good governance practices. Instead of trying to anticipate any future event or be too prescriptive, a structure that ensures the installation of an experienced board of directors is probably the best approach. What for? Indeed, directors are responsible to the company, not to the shareholders, as is generally believed. If directors conscientiously complete this mandate, many problems can be solved. A “shotgun clause” is often used to force a buy-out. It works like this: Shareholder A offers Its Shareholder B shares at a certain price per share (to 2 shareholders). B may accept this offer or offer A the same conditions as in the event that A has to accept. This ensures that A offers a “fair” price. For the most part, one party will end up buying out the other (of course, both parties can simply agree on a price – it`s easy if a shareholder wants to pull out to pursue other interests.

It will be more difficult if both want to own and run the business. The shotgun approach is ideal for small businesses where values are not too high because they favor the party with more financial resources. For high-tech companies that have high valuations and multiple shareholders, Shotgun`s approach wouldn`t work very well. What happens when a shareholder dies? There should be a fair way for surviving shareholders to acquire (optionally or compulsorily) shares in the estate of the deceased shareholder. The company should have life insurance in order to be able to finance such buyouts. It is a good idea to also get specialized advice in tax accounting in this area. What is the importance given to actions? Options: external valuation expert (expensive and unpredictable) or encourage shareholders to agree on a value and attach it to the agreement as a schedule (updated regularly) or using a formula (multiple of profits or sales, book value, etc.) or a combination of those mentioned above. If a buyer wants to buy the company and most shareholders are interested in selling, the small minority who want to bear a better price or refuse to sell (ego problem perhaps?) may be required to participate in a market if more than a certain number (say 90%) of the shares are offered to a buyer…

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