Shareholder Agreement and Exit: Which Clauses You Should Review Now

Many entrepreneurs think the shareholder agreement is something for lawyers – to regulate the founding phase. In truth, the shareholder agreement is the most important document when it comes to exit.

Why? Because the shareholder agreement defines how a business can be sold. Who decides? Who can take their money out? Who has pre-emptive rights? What happens to the minority shareholders?

If you don't have a good shareholder agreement – or if the exit clauses are wrong – your exit can fail or become much more expensive.

Drag-along rights means: The majority can "drag along" the minority. If 75% of shareholders agree to a sale, the other 25% must go along too. The buyer gets 100% ownership.

This is very important for buyers. They don't want individual minority shareholders to negotiate around the deal or assert pre-emptive rights.

For you as founder this is a risk if you're a minority shareholder. You can be forced to sell even if you don't want to. Solution: Check your shareholder agreement and make sure the drag-along threshold is fair (80% is better than 50%).

Tag-along is the opposite: The minority can "tag along." If the majority sells, the minority can also sell their shares at the same price and same terms.

This protects minority shareholders. They can't be left behind while the majority makes a big deal.

For you: Make sure your shareholder agreement has tag-along rights. This is essential for a fair exit.

Pre-emptive rights mean: If a shareholder wants to sell his shares, the other shareholders must have the first chance to buy. Only then can you sell to external buyers.

This is good for shareholder cohesion. But it can slow down an exit. If multiple shareholders have pre-emptive rights at the same time, negotiations can become complicated.

Co-sale rights are similar: The selling shareholder can "bring along" the buyer to sell the others as well. This speeds up exits because you don't get stuck in pre-emptive negotiations.

"Good leaver" means: A shareholder who leaves the business (for good reason or good timing) gets a fair price for his shares.

"Bad leaver" means: A shareholder who leaves the business or gets into conflict gets a reduced price or must sell his shares on unfavorable terms.

This is important for founder exits. You don't want one of your co-founders to claim: "You're a bad leaver, so there's only 50% of the price." Make sure the criteria for good/bad leaver are fair and transparent.

A shotgun clause is an exit clause for conflicts: One shareholder can offer the other a price. The other can either sell at that price – or buy at that price themselves.

This forces both sides to be fair. Nobody gets offered overly high or low prices.

A buy-sell agreement regulates: What happens if a shareholder dies, becomes disabled or wants to leave? Who buys the shares? At what price? These are essential clauses to avoid family conflicts.

The VOS Assessment doesn't just examine finances and processes – it examines legal structures too. This includes: Is the shareholder agreement clear? Are the exit clauses fair? Are there hidden conflicts or dependencies?

A good VOS Report says either: "This shareholder agreement is clean and exit-friendly" or "ATTENTION: There are hidden risks that need to be addressed before the sale."

With VALENTYR VOS you know if your shareholder agreement is an asset or a risk. And you can fix problems BEFORE the buyer comes.