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sale of a minority shareholding

 
#1 sale of a minority shareholding
21/04/2013 19:58

amazon

I own a minority stake in a small consultancy which is being bought.

The prospective buyer has identified some of the other partners as key individuals whom they want to keep on. They have included shares in the sale price, but want these to be allocated to these individuals as an incentive for them to stay. To be clear, the shares are not a bonus on top of their salary, but actually form part of the selling price of the business.

First of all, does anyone know if this allowed? Shouldn’t all shareholders be treated equally and be given an equal share of any proceeds?

Secondly, if this is allowed, is there anything I can do to help ensure I get a fair share of this? It’s hard to judge, but I suspect everyone else wants to sell. I could refuse to sell, but my minority stake will probably be worth very little if I do not sell together with the others.

Any pointers appreciated!

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#2 RE: sale of a minority shareholding
21/04/2013 22:54

CheckingOut to amazon (#1)

1) Drag Along Rights

- DO the majority shareholders (c70% holder) /or the articles have "drag along" rights.....?

- If they do there you can be dragged along in the sale...

2) Purchaser's prerogative to give shares in the buying entity,,

- The purchasers may be granting shares in the Newco or buying vehicle which is the purchaser's prerogative to do....

You should discount/ignore all the above and go and seek independent legal advice.

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#3 RE: sale of a minority shareholding
22/04/2013 07:02

amazon to CheckingOut (#2)

1) The majority shareholders (75%) do not have drag along rights

2) Shares are in buying vehicle. However make up part of the price which we agreed to sell for.

3) I'll try to get advice. Problem is the other partners use the same legal advisers.

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#4 RE: sale of a minority shareholding
22/04/2013 09:30

Bushy Eyebrow Partner to amazon (#3)

Nice. So, in effect, the new owner is offering to give the partners who are being retained some additional equity by diluting your own equity - is that what they're proposing? OR are they offering to give them back some of their equity once they and all the others who are not being retaind have sold it to the new owners. In extremis, I wonder what would happen if you own, say, 10 shares and they decide to offer the partners another 10,000,000 shares? Would your profit share go down to 10p?

I would start by working out what % of the business you own. Then ensuring that you maintain that same percentage post-sale. It is easy in these situations for people to work up all sorts of schemes that are basically con jobs. You need to get involved in the discussions! I'm sure their intentions are honest but you need to keep a watchful eye on it.

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