Put and call share option agreement
If the arrangement works, everyone benefits. But many times, sellers have difficulty adjusting to a new role where they no longer are in charge. Traditionally, the buyer buys percent of the company and puts the former owner under a management contract.
As a result, they buy a majority interest, but the former owner is still invested. As the seller, you have concerns. Selling to a larger corporation gives you better access to capital markets, and funding sources should be better and less costly, allowing you to improve operations and grow your business. The matters to be considered when preparing the agreement include:. It is common in many companies of the consent of other shareholders to be required. When the exercise of a share option brings a new shareholder into a company, it is worth considering whether a shareholders agreement is necessary.
For more information on shareholders agreements, click here. We are very experienced in advising on and preparing share options, both for general use and for employees in approved EMI schemes and unapproved schemes. We can also advise on other legal issues that arise in running a business, such as property and employment matters and all kinds of commercial agreements.
The other side may elect to sell or, if the price is too low, buy. The seller is often at an economic disadvantage. You worked your whole life to build a company turn it into cash and now you must sell your shares at a lower price or buy the company back. This is a very good tool if you can negotiate it. In order to ensure some degree of management stability or to allow the buyer to plan for the capital needed to buy the remainder of the shares, you may not be able to trigger the option for a reasonable period.
A period of three to five years, beginning on the third anniversary of the sale, is not uncommon.