Founders FAQ #8

, 1min read

The dups Founders’ FAQ is a compilation of the most common questions founders ask us about their startup, their fundraising or their relationship with investors.


 

My co-founders want to sell their shares and found a buyer with whom I don’t want to work. Can I force them to sell their shares to me first? If I don’t have the money, can I force the buyer to buy my shares as well?

Almost all shareholders’ agreements regulate the ownership of the shares, often in the form of rights of first refusal (ROFR) or pre-emptive rights.

ROFR and pre-emptive rights give shareholders the opportunity to buy the other shareholders’ shares before they are sold to a third party. When selling shareholders find a potential buyer, they must first offer their shares to the other shareholders at the same price and conditions, or at a price to be determined according to an established formula. This prevents an undesired third party from becoming a shareholder and thereby disrupting the partnership.

If you are not willing to work with the potential buyer but can’t afford to buy the shares of the other shareholders, a tag-along clause might be very useful.

Tag-along rights allow their beneficiaries to force a potential buyer of another shareholder’s shares to purchase their shares as well.

ROFR, pre-emptive rights and tag-along rights can therefore be quite helpful for protecting minority shareholders.

If no contractual provision was included upon entering into the partnership, the articles of association and/or the legal provisions will apply, with some variations based on the form of the company.


 

You have a question about shareholders’ agreements or other topics? Let’s have a chat, we’d be happy to help!

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