Shareholder Agreement Transfer to Family & Transfer on Death/Incapacity of Shareholder

This template shareholder agreement is based on our Standard Shareholder Agreement - No Share Issue but with changes made to the transfer provisions.

Typical right of first refusal position

Most shareholder agreements provide that if a shareholder wishes to sell or transfer their shares, the other shareholders have a right of first refusal pro-rata to their current shareholding proportion before the shares are offered to anyone else.

This is an option (not an obligation) to purchase the shares and can help shareholders maintain a level of control over who the shares may be transferred to, as well as acting as an anti-dilution measure.

Two carve outs included in this template

• An overriding provision allowing a shareholder to freely transfer shares to family members at any time.
• A provision dealing specifically with the death or incapacity of a shareholder.

Death or incapacity: valuation and deemed offer mechanism

On the death or incapacity of a shareholder, the template allows for that shareholder’s shares to be valued, and this is then deemed to constitute an unconditional offer for their sale, first to the company and then to the other shareholders.

The beneficiaries of the deceased should therefore receive a fair value, market price for the shares.

This clause may be drafted so that the shares are instead transferred directly to the deceased’s beneficiaries, but this can be a complicated area and shareholders need to consider what they want to achieve in the event of death or incapacity.

Shareholders may also need to consider whether they want families (who may have no business experience) to inherit shares and how that may be perceived by the other shareholders.

There will also be tax and insurance matters to consider.

Guidance note and advice

This agreement includes a brief guidance note at the beginning to address these issues.

It is essential that parties seek independent legal and tax advice.

No new share issue

This agreement anticipates that no new shares are being issued.

Shareholder Agreement Transfer to Family & Transfer on Death/Incapacity of Shareholder is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.