Covenant on shares

[Mike wells]

Hi can you put a covenant on shares to stop a business partner from ever buying them ?

 

[Mr D]

Your shareholder agreement could specify who gets first dibs on the purchase of shares. However its usually up to the seller of the shares to sell them to whom they want at whatever price they want. If you don't want your business partner to buy your shares then don't sell them to the business partner.

 

[Mike wells]

But would it be possible to do ?

 

[Newchodge]

Could you elaborate a bit. Who currently owns the relevant shares? To whom are they planning to sell them? Not names - just roles.

 

[Mike wells]

Myself and my business partner , we are both directors . I don't want my partner to own all of the company even in the future (a promise I made to our employees )

 

[Newchodge]

Myself and my business partner , we are both directors . I don't want my partner to own all of the company even in the future (a promise I made to our employees )

And to whom are you selling your shares?

 

[Clinton]

Hi can you put a covenant on shares to stop a business partner from ever buying them ?

No.

Block him from buying shares - even via a written agreement between you two - and he could use a puppet, an SPV, whatever, to get around that block and acquire said shares. Easy peasy.

 

[Mr D]

Myself and my business partner , we are both directors . I don't want my partner to own all of the company even in the future (a promise I made to our employees )

So do not sell and you get to keep your promise.

No idea why you made that kind of promise, a shareholder does not have a great deal of power in a business and him having 50 percent of shares or 100 percent of shares will not affect the running of the business - though can affect things requiring a shareholder majority.

 

[obscure]

Myself and my business partner , we are both directors . I don't want my partner to own all of the company even in the future (a promise I made to our employees )

As stated above, the only way would be to never sell your shares. Any form of agreement you entered into could be effectively negated in a host of ways as detailed by Clinton.

 

[Engage Legal]

As an alternative, you could potentially put some sort of charge on the shares which would prevent certain dealings with the shares. Assuming a charge can in fact be effected in that way, you would want to structure the charge very carefully , to make sure it does what you in fact want it to do.

 

[Clinton]

Myself and my business partner , we are both directors . I don't want my partner to own all of the company even in the future (a promise I made to our employees )

If you're serious about this promise to the employees, rather than just intending it to be an oral promise that you can later renege on, then show you are serious. Stick the shares into a trust with you as the beneficiary and with the employees being the sole trustees.