Selling Shares? What Does The Shareholders Agreement Say?

shareholders agreement

Selling Shares, Not Dissolving Partnership

With your name as a shareholder of a company in a shareholders agreement, you partly own that company. At least a certain percentage of its profits belong to you. Are you thinking of dissolving that ownership? Are you thinking of selling your shares? Perhaps you are planning to retire or leave the company. Or you might just want to sell your shares in order to raise some money. You should be able to access the company’s shareholders agreement and check what is your entitlement, as well as check what are the conditions for shareholders when they want to sell their shares.

Restrictions on Shareholders Agreement

A shareholders agreement will state conditions by which the selling of shares may be permitted. There are also restrictions for shareholders when selling their shares. Restrictions stipulated in the agreement serve a purpose; that purpose is to protect the company and the remaining shareholders. Some companies will allow shareholders to freely sell their shares. But as a general rule, shares should be sold to a buyer with the remaining shareholders approval. Think that they will have to work with and make important decisions with a complete stranger which will heavily impact on the management of the company.

Shares and Financial Objectives

You need to think carefully about your financial objectives before contemplating the dissolution of your ownership by selling your shares. If you are trying to raise finances you need to consider that once you sell your shares, someone else will own your stock. As an investor or shareholder you hold stock for a period of time until you are ready to sell, but only if you will profit from the sale. You could raise a large capital by selling your shares but remember that you loose ownership. But if you simply raise capital without selling, you can pay back to the company with very little or no interest at all.

Before deciding to sell your shares, give us a call to discuss your options. We will need to look at your shareholders agreement in order to adequately advise you. SG

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