Pre-Emption Rights

You need to know your legal position when looking to sell your shares – we can help.

Realising the value of a shareholding in a private limited company is not always a straightforward process, so if you are to succeed you need to understand how this process works for your company.

The problems you will face in trying to realise the value of a shareholding in a private limited company can be made more difficult by provisions in the company’s articles of association or (if there is one) in a shareholders agreement, making it harder to realise your commercial goals.

In particular, it is very common to find that these documents contain restrictions on the disposal transfer of shares. For example, they may stipulate that only a certain class of individuals can hold shares in the company (such as the relatives of the original shareholders).

Most commonly, restrictions on the transfer of shares take the form of 'rights of pre-emption' whereby the shares which are to be sold or transferred must first be offered for sale to a prescribed class of individuals (normally the other remaining shareholders).

This, in effect, means you have to offer a right of first refusal before you can sell the shares elsewhere or to someone who may be a 'stranger' to your remaining shareholders.

We are experts in this area and can advise you on what pre-emption rights mean for your plans moving forward.