There can be multiple reasons for wanting to sell shares in a privately owned company. You may require another shareholder to share in the duties and responsibilities that come with operating a company, decrease your workload, relocate capital, or retirement may be on the horizon.
You may have a family friend, loyal employee, or even a son or a daughter who may be looking to step up and take on some extra responsibility, who is seeking total or partial ownership of the company.
To facilitate the sale of shares in a company you will require an Agreement for Sale and Purchase of Shares. The Agreement will need to set out how many shares are to be transferred, the value of the shares and the terms of the transaction. The terms of the transaction can include what powers, rights and entitlements are to pass to the purchaser (if any), what powers, rights and entitlements are to remain with you as the vendor, the proposed structure of the company, safeguards to protect your interests in the company and any financial terms that apply. Other aspects to consider are pre-emptive rights, drag along and tag along rights, voting rights and disclosure obligations. The Agreement can be tailored to your specific circumstances and needs; therefore, it is important that you obtain professional legal advice.
Other documentation such as a Company Constitution and Shareholders’ Agreement may also be necessary, depending on the circumstances of the situation. Loan documentation may also be necessary if you are wishing to provide financial assistance to the proposed purchaser.
Determining the value of the shares will be an important component of the sale. Common practice is to sell the shares at market value, with the assistance of your accountant. Obtaining professional legal and accounting advice in respect of the transaction will be imperative.
If you are considering selling shares in your privately owned company please do come and speak to our experienced commercial team here at Pier Law and we will be more than happy to assist you through the entire process.