Key as­pects

Finweek English Edition - - ENTREPRENEURS -

Com­pre­hen­sive pro­vi­sions deal­ing with the sale of shares, in­clud­ing the cir­cum­stances in which a share­holder will be forced to sell his shares (such as his se­ques­tra­tion), the val­u­a­tion of shares at the date of sale, pre-emp­tive rights and the pro­ce­dures to be fol­lowed by a share­holder wish­ing to sell shares. A clear de­scrip­tion of the de­ci­sions of the com­pany that will re­quire a spe­cial res­o­lu­tion (75% ap­proval), such as the sale of the bulk of its as­sets or tak­ing on sub­stan­tial debt. The terms on which all share­hold­ers may be re­quired to fund the com­pany, in­clud­ing ini­tial con­tri­bu­tions and the in­ter­est rates and re­pay­ment terms ap­pli­ca­ble to all loan ac­counts, the cir­cum­stances in which the com­pany may call for fur­ther fund­ing from share­hold­ers and the con­se­quences of a fail­ure to pro­vide fund­ing (in­clud­ing di­lu­tion of share­hold­ing). Dis­pute res­o­lu­tion mech­a­nisms deal­ing with dead­lock, ar­bi­tra­tion and mi­nor­ity share­holder pro­tec­tion. An exit strat­egy. What will hap­pen when a third party wants to buy the com­pany as a whole and not all of the share­hold­ers want to sell? The in­clu­sion of mi­nor­ity pro­tec­tion, or “come-along” and “tag-along” clauses, can be es­sen­tial in such cir­cum­stances. Build­ing value is just one part of the en­tre­pre­neur’s chal­lenge. And while it should be a key fo­cus for busi­ness own­ers it should not be for­got­ten that mech­a­nisms need to be in place to phys­i­cally trans­fer the value you have cre­ated.

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