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Shareholders’ Agreements Glossary: Terms to know about Shareholders’ Agreements.
Shareholder disputes are amongst the most challenging areas of work for legal advisers, there are many legal terms used when dealing with this sector.
Below is a list of terms and a description of what they refer to.
Bad Leaver
Bad Leaver is an employee-shareholder who leaves employment in circumstances where shares may be acquired at less than their fair value.
Call Option
Call option is the right to buy the shares of a person which may be triggered by that person ceasing to be employed. This could be at a pre-agreed price or by reference to a third-party valuation.
Chairman’s Casting Vote
Chairman’s casting vote refers to the right for the chairman of any meeting to have a second vote in the event of a tied vote. This right can be exercised at a Board Meeting if directors’ votes are equal. It may also be exercised at a shareholders’ meeting but not for a company incorporated after 1 October 2007.
Fair Value
Fair Value is the market value of a share but with no discount applied by reason of the shares representing a minority interest. Under ordinary principles of valuation, shares representing less than 50% may be ascribed a lower value per share. The same principle may apply to a small minority shareholding that cannot block a special resolution (i.e., less than 25%).
Our Shareholder Agreement Law Expertise
Shareholders’ agreements are highly bespoke documents which can range from the very simple to the very complex.
Our Corporate law team routinely assists with the preparation of shareholders’ agreements and we will discuss and work with you to identify your requirements.
Every shareholder agreement will involve detailed consideration of the obligations of each shareholder, and we will be there to advise you and guide you through all the issues and potential pitfalls that you should consider.
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Good Leaver
Good Leaver is an employee-shareholder who is entitled to be paid fair value for their shares if they cease to be employed.
Inquorate
Inquorate means a meeting that lacks a quorum.
Model Articles
Model Articles were introduced following the enactment of the Companies Act 2006 and set down a standard constitution for a private company and a public company incorporated after 1 October 2009. A company is free to modify the Model Articles provided the amendments comply with the Companies Act 2006.
Ordinary Resolution
Ordinary Resolution is a resolution passed by the holders of most of the voting shares.
Partners
A Partner is the relationship between two or more persons in business together and where there will be a mutual duty of confidence and trust.
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Quorum
Quorum is the number of people who need to be present at a Board Meeting or General Meetings for it to be legally constituted so that decisions can be made.
Quasi-partnership
Quasi-partnership refers to a company formed by two or more shareholders in circumstances where they may be regarded as partners.
Rectification
This is the order of a Court requiring a change to the Register of Members.
Special Resolution
Special Resolution is a resolution passed by the holders of 75% or more of the voting shares.
Table A
Table A refers to Table A of the Companies Act 1948 or of the Companies (Tables A to F) Regulations 1985 as amended. This sets out the standard constitution of a private or a public company that can be modified in the company’s own Articles of Association. For companies incorporated after 1 October 2009 a new standard set of Articles has been introduced: these are called the Model Articles
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