Shareholder Agreement To Sell Stock To Other Shareholder: Fill & Download for Free

It can happen more often than you might think.The specifics will generally be included in a share option agreement or a shareholders’ agreement.You may have to sell your vested shares to other shareholder(s) or back to the company at market value or nominal value if you are considered a bad leaver under the terms of your agreement with the startup.What a bad leaver is varies from agreement to agreement but most generally, you could be considered a bad leaver if:You are firedYou have committed gross misconductYou have committed fraudDo ensure that you have vesting provisions reviewed thoroughly by a specialist lawyer before you get into an agreement → It might help you avoid such situations!I hope this helps!We’ve helped navigate through vesting provisions hundreds of times, so if you’d like Linkilaw offers a Startup Legal Session (It’s Free!).

The most important step to ensure your shares are protected in your company are putting together a Shareholders agreement.A shareholders agreement essentially lists out the shareholders of the company and their rights and obligations. This legally binding document allows you to spell out what percentage of the company you own and what percentage of ownership other shareholders have.Other steps you can take to protect your Startup shares in your shareholders agreementInclude Conditions upon exitingIn order to protect your business you can also decide what happens to shareholders once they depart from the company.For example you could force all exits to sell their shares at market value or nominal value once they leave in order to make space for new motivated investors.2. Include Terms of vestingThe terms of vesting essentially enables you to give away shares over a certain time period. For example if you are not sure whether your partner is willing to fully commit to the startup and he requests 20% of the company shares you can opt to give him this over a 4 year period (by giving him 5% every year for four years)3. Include a Dragalong ClauseAs you own the majority of the business you can also include the drag along clause which forces all minority shareholders to sell the business if the majority requests it (In this case, as you own the majority of the company if you wish to sell it then all others must follow suit).I hope this helps! If you need a cost-effective and bespoke shareholders agreement visit here. Or if you are unsure about what you/your business requires legally, we offer a Startup Legal Session (It’s Free!) here or you can read our blog for more details on startup requirements.A little update on my answer:I frequently get asked by clients how much equity to give to a co-founder, employee, or investor—but with so many factors to consider, the calculation is never simple.That's why our legal team developed an algorithm that weighs the various considerations for how to split your equity fairly. I'm so excited to share the final product, Spliquity, the ultimate Startup Equity Calculator!With Spliquity you can invite your co-founders to complete the process themselves, compare results and start an honest dialogue.You can also download a detailed Equity Split Report in PDF for a more in-depth analysis of the breakdown for you and your investors.It’s based on the experiences of thousands of startups and has been verified by our community of lawyers.We hope this tool will help start honest dialogues between founders about visions for their company and what they bring to the table.

A Lock Up provision (that's the US terminology; international seems to sometimes go the other direction :-) is a section of a Shareholders Agreement in which some or all shareholders agree that they will not be able to sell any of their stock in the company following a specific event.This is most frequently seen in Initial Public Offerings (IPO) where for the first time there will be a public market for a company's stock. Without a lock up provision, there would almost certainly be a rush as every employee with vested options, every angel investor and founder immediately tries to sell some or all of their previously-lilliquid equity. The result of all that stock hitting the market simultaneously on the sell side would be to drop the price of the stock dramatically...just at the moment when the company is hoping the market will give the stock price a "pop", and trade it even higher than the IPO price.To counteract this, the most common lockup provision is that all shareholders as of the IPO agree that they are not allowed to sell any of their shares for 90 or 180 days after the event. By that time, the market will have settled down (the theory goes), and any trades will not have as big an impact.Lock ups are also often used in the case of acquisitions of one company by another, or in employment agreements where a senior executive is given restricted stock that can't be sold for a particular period of time.