When investing in a company, whether as a founder, co-founder, or strategic investor, most people focus on the business plan, the valuation and the growth potential.

One question that is often overlooked:

How can a shareholder exit this company, and under what terms? 

Share transfers and shareholder exits often happen when:

• A corporate shareholder wants to transfer shares to related companies
• An individual shareholder wants to transfer shares to family members
• A shareholder wants to divest its investment
• A shareholder exits due to events outside its control, e.g. death, disability, retirement, or resignation for valid reasons, such as redundancy or ill health.
• A shareholder exits under unfavourable circumstances e.g. misconduct or breach of contract.

When investing in a company, shareholders should consider:

• Under what circumstances an exit is permitted
• Whether share transfers should be voluntary or compulsory
• Whether shares must first be offered to existing shareholders before being transferred to external parties
• Whether tag-along and drag-along rights should apply
• How shares will be valued at the time of exit

Exit planning is best addressed before investing, when relationships are cordial.

If you are considering investing in a company, ask the hard questions before investing.

 This post was first posted on LinkedIn on 10 July 2025.