How does a company control its shareholder composition?

Linkedin Post

One common reason for a company to control its shareholder base is to prevent a shareholder who is no longer actively involved in the day-to-day operation of the company from exerting influence over the company.

A company may achieve this control through compulsory transfer provisions.

These provisions typically require officers or employees who hold shares in the company to transfer or forfeit their shares upon termination of their office or employment. The common mechanisms for forfeiture include the following:

1. Exiting officers or employees may offer the shares to the company to purchase through a share buyback arrangement.

2. Exiting officers or employees may offer to transfer the shares to the remaining shareholders.

3. The shares may be converted to a deferred class of shares.

When preparing a shareholders’ agreement, constitution, or terms and conditions of a share grant scheme, consider whether it is appropriate to include compulsory transfer provisions.

This post first appeared on LinkedIn on 13 July 2023.

Linkedin Post
Five key steps for legal due diligence

Most lawyers are good at identifying issues, but legal due diligence shouldn’t be limited to merely reviewing documents and identifying issues. Here are my five steps for conducting legal due diligence: 1. Identify the issues based on the scope of legal due diligence as agreed with the clients. 2. Provide recommendations …

Linkedin Post
Begin with the end in mind: Post-completion integration

I once worked on an M&A deal that took more than a year to complete. While the deal was not inherently complex, it dragged on due to delays in finalizing the details of the transaction agreements for reason beyond my control. As the deal involved a larger corporation acquiring a …

Lawyering
Being a Corporate Lawyer: Why I Do What I Do

After years of demanding schedule and juggling simultaneous corporate exercises which take a toll on physical and mental health, it is not surprising that some corporate lawyers experience burnout. Unlike some legal practice areas, the work of a corporate lawyer may not seem immediately impactful or “make a difference” to …