Selling Shares

[gamer1810]

Hi

I would be grateful for some help!

I am selling a share in my business to an investor. This will be anything from 3% to 10%. I currently own an 87% share.

My accountant can process the share transfer forms and update the share register, Companies House etc.

However, do I need to draw up any specific contract between me and the investor for the sale of shares? ie "You give me money and I give you shares" type thing?

Thank you in advance!

 

[mahutchinson]

Firstly you need a fair valuation. you don't mention this so I assume you have one from your, or another, accountant. Don't forget stamp duty if the consideration is over £1000 and use the new style stock transfer form with just a certification on the back, which is completed if consideration is under £1000.

The normal documentation would be a shareholder agreement which covers all future situations as well as the actual sale. This is not obligatory but the lack of one is the basis for a very large percentage of the problems outlined on this forum. Simply for the sale you could draft a share sale and purchase agreement as it is a sale from you to them. If it was an allotment of new shares the new holder would just write a letter of application. Let me know if you need help with an agreement or any of this.

 

[kudders]

Firstly you need a fair valuation. you don't mention this so I assume you have one from your, or another, accountant.

Not sure this is quite correct. You need to agree a price for the shares but I am not sure why you would need a valuation? Presumably the investor is happy to pay the agreed price for the percentage he is buying?

The stock transfer form mentioned is sufficient to transfer the shares, you don't really need a bulkier contract unless the investor is looking for warranties from you or there are other aspects to the deal which need to be documented.

A shareholders agreement going forwards would be sensible as MAH says if the investor is looking for 'rights' beyond what a 3-10% shareholding might offer. Also, if you are expecting the investor to deliver or perform certain things for your business, you could deal with it in this agreement.

 

[Lime One]

We would advise a client to get a fair valuation as proof that the transaction is not carried out under value and to avoid storing up issues for the company later down the line. Many investors do require other conditions for investments ie Non Executive roles and shareholder's agreements. Happy to talk through the various options with you free of charge, if you PM us.

 

[kudders]

No issues for the company as far as I can see due to the transaction being between an existing shareholder and a new shareholder i.e. nothing to do with the company.

If both parties are happy with the price then I would say there is no need for a valuation and all you will be doing is lining the pockets of a valuer. Not trying to be difficult, I just don't see the need.

 

[gamer1810]

Thanks for your feedback guys - really useful.

I have drafted up a short agreement for the investors peice of mind really and stated what rights his shares attract, so I think I am covered now.

Thanks once again!