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If you're a majority shareholder and you want to sell the entire shares of the company (perhaps you wish to market the company or a buyer has already made an offer), then you will either need to ensure that the other shareholders are willing to sell their shares or have a mechanism (either in your articles, shareholders' agreement or, ideally, both) to permit you to ‘drag’ along the other shareholders to the sale.
The standard articles of association (i.e. the Model Articles, Table A) do not provide the right for a majority shareholder to ‘drag’ the other shareholders along in a sale. This can be problematic. A majority shareholder may struggle to convince the other shareholders (or perhaps just one difficult shareholder) to sell their shares, which can affect the attractiveness of the deal. Typically, a buyer will want to acquire 100% of the shares in the company to ensure absolute control.
To avoid such issues, a well-drafted shareholders' agreement and/or articles can provide a drag right that permits the majority shareholder(s) to drag the other shareholders to participate in the sale on the same terms. This provides both the buyer and majority shareholder the certainty that any sale can be for the whole of the company. It reduces the risk of having issues with stubborn shareholders who don't want to sell.
The best time to include such provisions in a shareholders' agreement and/or your Articles would be well in advance of entering discussions for sale. However, it's always worth running through the facts if that horse has already bolted.
To discuss any of the above further, please contact Philip: philipmiles@bexleybeaumont.com | 07388 344576
