Advice on signing Shareholder Agreement

[DerekJohnstone]

My business partner is leaving the business in pursuit of a new venture and he is about to sign the Shareholder Agreement in which he will sell his shares to me.

He is unable to meet and says he will sign the document remotely - scan - and send over to our accountant.

Is this legally competent as it requires a witness - but presume the accountant is the witness?

Any advice appreciated.

 

[fisicx]

Best person to ask is your accountant.

Why can’t the seller get it witnessed locally and put the form in the post?

More advice here (you might not even need a certificate):

Completing a stock transfer form

Find out how to complete a stock transfer form and get it processed.

www.gov.uk

 

[The Resolver]

I presume you meant to refer to a Sale and Purchase Agreement not a Shareholders Agreement. The latter may contain terms relating to what happens when a shareholders wishes to leave/sell , but it signing does not effect a sale. You may also be referring to a Stock Transfer form which is the document that actually passes ownership in the shares but it is totally inadvisable to effect a sale of shares by simply the STF without a full Sale and Purchase Agreement to cover all the terms (especially as to warranties, how to deal with interim dividends etc). In any event the signatire on the STF does not need to be witnessed and there is no space for it on the form.

You say that he is selling hsi shares ot you . However have you taken advice as to whether it is wiser for hito sell his shares to the company itself. Thsi depends on whether there are distributable profits left in the business.

The signature on a Sale and Purchase Agreement should be witnessed but if not and only have a scan it still will amount to evidence of the agreement. The key signature you need is on the STF. Nothing else actually transfers the shares as opposed to just an agreement to transfer..

Call me and I will clarify and advise on a free 30 mn call..

 

[studioJK]

@The Resolver

While I agree that there should be a sale and purchase agreement in place, I am intrigued by some of your comments.

1. You noted that a stock transfer form does not need to be witnessed, but wouldn't this depend on the articles of the company, since the articles could mandate the stock transfer form to be executed as a deed (in which case, a witness is required)?

2. It is not clear to me why a sale and purchase agreement would need to be witnessed, given it is a simple agreement. I would say that it could be e-signed or signed through a scanned copy (using the Mercury method). It would be interesting to understand your rationale.

 

[The Resolver]

1.

@The Resolver

While I agree that there should be a sale and purchase agreement in place, I am intrigued by some of your comments.

1. You noted that a stock transfer form does not need to be witnessed, but wouldn't this depend on the articles of the company, since the articles could mandate the stock transfer form to be executed as a deed (in which case, a witness is required)?

You are absolutely correct. The Articles could require the STF to be executed as a Deed/witnessed in much the same way that they could require the signature to be by quill pen made out of ostrich feathers whilst wearing a red velvet smoking jacket. However in all my years in this game I have never come across Articles of Association with such a requirement (although interestingly Singapore law does require a witness. But then Singapore law bans chewing gum). The Model Articles do not require it and, stepping up to the cause, I have just checked over 166 years of different versions of Table A going back to 1856 (you can quickly see them all here ) and none require it. Thats not to say a totally bespoke set of Articles can't require it but I would argue that, even if it did, an unwitnessed STF would be hard to invalidate.

2. It is not clear to me why a sale and purchase agreement would need to be witnessed, given it is a simple agreement. I would say that it could be e-signed or signed through a scanned copy (using the Mercury method). It would be interesting to understand your rationale.

My rationale? Well for the reason any Agreement is witnessed, being in order to disprove any later claim by the signatory that he/she did not sign.

 

[Gyumri]

2. It is not clear to me why a sale and purchase agreement would need to be witnessed,

@The Resolver didn't say it would need to be but that it should be.

Commonly-asked questions about the signing of deeds and documents | Gateley

Here we answer some commonly-asked questions about the signing of deeds and documents.

gateleyplc.com

 

[studioJK]

You are absolutely correct. The Articles could require the STF to be executed as a Deed/witnessed in much the same way that they could require the signature to be by quill pen made out of ostrich feathers whilst wearing a red velvet smoking jacket. However in all my years in this game I have never come across Articles of Association with such a requirement (although interestingly Singapore law does require a witness. But then Singapore law bans chewing gum). The Model Articles do not require it and, stepping up to the cause, I have just checked over 166 years of different versions of Table A going back to 1856 (you can quickly see them all here ) and none require it. Thats not to say a totally bespoke set of Articles can't require it but I would argue that, even if it did, an unwitnessed STF would be hard to invalidate.

I have seen quite a few of these requirements before, but they were all bespoke articles and organisations with substantial size. It is good to know regarding the positions across the versions of Table A though! Thank you.

My rationale? Well for the reason any Agreement is witnessed, being in order to disprove any later claim by the signatory that he/she did not sign.

If this is the concern, it seems to me that DocuSign (or other e-signing tool) is safer from this perspective, particularly if one has done basic due diligence / KYC of the person and given the fact that the signed document cannot be tampered with, without changing data integrity. Witnessing itself has quite a few practical complications (such as the independence / validity of the witness).

@The Resolver didn't say it would need to be but that it should be.

From an adviser's perspective, I don't think there would be a difference between "should" or "must", since it would be rather wrong to argue this distinction, when the recipient acts upon a "should". However, this is, of course, up to the person to decide.

 

[Gyumri]

You are generally correct. But see this:

Legal insights and updates | Ashurst

Sharing our knowledge and expertise

www.ashurst.com

 

[The Resolver]

I have seen quite a few of these requirements before,

Thank you. I would very much like to see the wording used given the liklihood an unwitnessed STF might still be acted upon as valid. Do they specfically use the term 'Deed' rather than just require a witness? Full consideration/payment is declared on the STF form so that reason for a Deed does not apply. Please just give me the name of any one company you are thinking of so I can read their Articles.