We fix the agreement of the owners to exit the business and sell it to third parties
Any questions regarding the conditions for participating in the business, including the possibility of leaving the business, selling a share or a business as a whole, should be discussed at the stage of creation and active development of the business, until everyone is inspired and does not think about possible difficulties.
At the same time, it is important that all, even the most non-standard arrangements of partners, be settled as much as possible, taking into account the real tools and capabilities of the current legislation. This will help to avoid future unexpected scenarios of relations.
Today is another case from our practice to illustrate how you can formalize the fantasy vision of business owners regarding a possible way out of it.
The production group of companies has several owners. Between themselves, they agreed on the following mechanism for exiting the business:
First of all, each of the owners is free to express a desire to leave the business.
He must first offer his share for the purchase to the remaining participants, regardless of whether he wants to sell the share or donate, for example, to relatives;
After that, internal tenders are held between the owners.
The owner who has offered the maximum price acquires a share in the business of the leaving owner, but only with the consent of the other owners.
If the owners did not agree among themselves on the purchase price of a share in the business or one of them opposes such a transaction, then the owners:
either continue to conduct business as before;
or looking for a buyer for the whole business.
Let us consider, in order, how the listed conditions can be regulated in corporate documents.
1. Tendering between owners
Relations between owners of internal tenders for the sale of shares (stocks) in companies are regulated in a corporate agreement:
A business owner who wants to sell a share in free form offers the rest of the participants to purchase it, agrees with them the purchase price. According to the results of negotiations (internal bidding), two options are possible:
a) the owner of the business reaches an agreement with one of the participants for the sale of the share, in which case a contract of sale of the share is concluded between the leaving owner and the participant who has offered a high price, with the consent of the other owners;
b) none of the participants agrees to purchase a share at a negotiated price, as a result of which the contract of sale of a share is not concluded.
In order for the provisions of the corporate agreement on the procedure for conducting internal tenders to be properly implemented in practice, the following shall be recorded in the Charter of the Company:
(a) a participant has the right to sell or otherwise alienate his share in the authorized capital of the Company to one or several members of the Company only with the consent of the other participants in the Company. This provision in the Charter of the LLC can be provided on the basis of paragraph 2 of Art. 21 of the Law “On LLC”.
(b) Such consent shall be deemed to have been obtained if the members of the Company within 30 days have submitted in writing a statement of consent to the alienation of the share or have not submitted within a specified time period an application to refuse to give consent.
The term for considering the proposal and giving consent does not have to be 30 days, it can be any – either more or less.
These provisions are aimed at protecting the interests of all owners:
firstly, due to the fact that it is necessary in the Charter to obtain the consent of the remaining participants in the Company to sell a share to one of the owners, we oblige the leaving owner to all other participants, without exception (and not to one of the owners), to send an offer (offer) to sell their share in the authorized capital of the company and thereby launch internal bidding;
secondly, this provision protects the remaining owners who are not participating in the transaction concluded as a result of internal trading. Such owners may not want to continue to conduct business with a reduced membership. In this case, they do not consent to the sale of the share to another owner.
In this case, all participants remain in the Company and the search for a buyer for the business as a whole begins.
Thus, each owner makes an informed choice – whether he wants to increase his share in the business and continue to work, stay with what he has or go the whole way of selling the business.
2. Sale of shares in the company to third parties
Suppose that the internal bidding did not take place, the owners did not agree on the price and terms among themselves, after which a buyer was found for the business as a whole.
What will be the mechanism of sale and guarantee to participants:
(A) In the event of a sale to third parties (that is, not previously members of the company), the remaining participants are given the right to pre-emptively buy a share at a fixed price pre-established by the Charter on the basis of paragraph 4 of Art. 21 Federal Law “On LLC”.
At that time, the owners agreed on a fixed market value for the entire business, which would suit all participants.