Quick question on shareholding thresholds
Discussion
I currently hold just under 15% of the share capital of a small private company. Founder holds the balance. Just one share class. We've adopted the Model Articles, subject to a few amendments in our A of A that I need to carefully check on.
I'm now looking at selling part of my shareholding to an outside investor. A friend has warned me that if I drop below the 10% level I lose certain rights under company law. According to p. 2 of this brief 2009 article the main loss would be the ability to refuse a compulsory acquisition of my shares if an offer is made for the company https://www.russell-cooke.co.uk/media/2033/overvie...
However, our A of A allow shareholders with > 60% to 'drag along' minority shareholders if an offer is made for the company, so I'm thinking the protection afforded at the 10% level under general company law is irrelevant.
Just wondered if there's any other theoretical or practical reason to stay above a 10% holding (I'm not intending to drop below 5% at this stage).
Thanks in anticipation.
I'm now looking at selling part of my shareholding to an outside investor. A friend has warned me that if I drop below the 10% level I lose certain rights under company law. According to p. 2 of this brief 2009 article the main loss would be the ability to refuse a compulsory acquisition of my shares if an offer is made for the company https://www.russell-cooke.co.uk/media/2033/overvie...
However, our A of A allow shareholders with > 60% to 'drag along' minority shareholders if an offer is made for the company, so I'm thinking the protection afforded at the 10% level under general company law is irrelevant.
Just wondered if there's any other theoretical or practical reason to stay above a 10% holding (I'm not intending to drop below 5% at this stage).
Thanks in anticipation.
You may want to check if the "drag" includes a "tag"
They may well be able to force you but you may not be able to force them to include you.
And if its sold to someone with deep pockets they may well be able to dilute you. (that may be possible now anyway)
Does the majority shareholder want you to sell your shares and/or does he have the right to buy them?
They may well be able to force you but you may not be able to force them to include you.
And if its sold to someone with deep pockets they may well be able to dilute you. (that may be possible now anyway)
Does the majority shareholder want you to sell your shares and/or does he have the right to buy them?
Many thanks, desolate.
Yes, we have Tag Along (co-sale) provisions also. These would kick-in if the Founder agrees to sell his controlling interest in the business to another controlling party - may become relevant as his aim is to sell out in 2-3 years once scale has been reached (though it's common experience that such start-up exit plans often take 3x as long as first mooted to come to fruition!).
The majority shareholder is encouraging my sale and it should be beneficial to bring in someone with broader private company experience. He did in fact buy-out the only other minority shareholder last year but didn't have the funds to buy me out as well. I should take comfort from having another minority shareholder in place.
Yes, we have Tag Along (co-sale) provisions also. These would kick-in if the Founder agrees to sell his controlling interest in the business to another controlling party - may become relevant as his aim is to sell out in 2-3 years once scale has been reached (though it's common experience that such start-up exit plans often take 3x as long as first mooted to come to fruition!).
The majority shareholder is encouraging my sale and it should be beneficial to bring in someone with broader private company experience. He did in fact buy-out the only other minority shareholder last year but didn't have the funds to buy me out as well. I should take comfort from having another minority shareholder in place.
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