“These gems have life in them. Their colors speak, say what words fail of.“ – George Eliot

Shareholder Agreement Valuation Clause

When an independent expert is asked to determine value at regular intervals or when an event triggers an event occurs, parties to a shareholders` pact should be satisfied that the selected person or company has statements about the nature of the business and that all relevant factors are taken into account. A shareholder pact sometimes indicates which designated entity is to make the valuation or may contain a list of appropriate valuation companies from which shareholders can choose if necessary. Often, because of their actual or perceived conflicts of interest with one or more of the company`s shareholders, the company`s accounting experts are often prohibited from acting as independent valuation experts. The Court justified this decision by the fact that, although a transaction was new, the negotiations and, therefore, the conditions of the merger did not take place. In this particular situation, the three-year judgment was so long that the current transactions became invalidated. This problem is not the only problem with valuation formulas and highlights how shareholder agreements should be structured for the handling of equity transactions. It is often advantageous for a shareholders` pact to commit circumstances regarding the sale of the company`s shares to a third-party acquirer. In particular, it may be advisable that the shareholders` pact include provisions relating to (1) compulsory sales rights, (2) “tagalong” rights and (3) participation in a subsequent sale. A shareholder pact can define a different dividend policy, which can allow different dividends to be paid to each shareholder if they have different stock classes. Piggyback rights, also known as “Tag Along” rights, protect minority shareholders in the event of a third-party purchase of shares of a majority shareholder. This allows minority shareholders to sell their shares at the same price and on the same terms if they wish, allowing the transaction to actually come into play. This protects minority shareholders from being in business with an unwanted new co-owner and accepting less attractive offers to avoid possible unfairness of a pellet gun clause, while protecting both shareholders who wish to divest their interests and those who wish to remain with the company, shareholder agreements often include a right of pre-emption.

Posted in Uncategorized 5 months, 1 week ago at 10:26 am.

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