Share Transfers, Capital Increases and Exit
A company’s ownership changes throughout its life: new investors come in, shareholders transfer shares, the company changes its legal form and one day the founders and investors exit. We carry out your share transfers, capital increases and conversions, and structure your exit strategies, such as a sale of the company or an IPO, from a legal perspective.
How is a share transfer carried out?
In a joint stock company, if no share certificates have been issued, shares are transferred by a written transfer agreement; registered share certificates are transferred by endorsement and delivery and recorded in the share ledger. Any provisions in the articles of association restricting transfer must be complied with.
Share transfers in a limited liability company are subject to stricter rules: the transfer agreement must be in writing with notarised signatures, the general assembly must approve the transfer and the transfer must be registered with the trade registry.
What is an exit?
An exit is when founders and investors leave the company by selling their shares and turn their investment into cash. The most common routes are selling the whole company to a strategic buyer, selling shares to another investor (a secondary sale) and an IPO. How an exit happens depends largely on the tag-along, drag-along and liquidation preference provisions in the shareholders’ agreement.
Scope
- Setting strategy for share transfers, capital increases, conversions and exit
- Drafting share transfer agreements and carrying out transfers
- Capital increases, moving to the registered capital system and conversions of legal form
- Sell-side advice in sales of companies
How We Work
- Assessing the purpose of the transaction and the current ownership structure
- Reviewing transfer restrictions and rights in the articles of association and the shareholders’ agreement
- Preparing the transfer agreement and general assembly and board resolutions
- Assessing the approvals required (e.g. from the Competition Board)
- Completing the transaction, share ledger entries and registration
Team
Frequently Asked Questions
What rights do existing shareholders have in a capital increase?
As a rule, existing shareholders have a pre-emption right to new shares in proportion to their holdings. For a new investor to come in, this right must be restricted by a general assembly resolution based on a justified reason, or the shareholders must not exercise it.
What is a liquidation preference?
A liquidation preference entitles the investor, when the company is sold or liquidated, to receive the amount invested, or sometimes a multiple of it, before the other shareholders. Because it directly determines what is left for the founders on exit, it is one of the provisions of the shareholders' agreement that needs to be negotiated most carefully.
What is the registered capital system?
The registered capital system authorises the board of a joint stock company to increase the capital up to a ceiling without a general assembly resolution each time. It speeds up the process for companies that raise investment frequently; non-public joint stock companies can also adopt it with Ministry approval.
Is Competition Board approval required for the sale of a company?
Yes, if the transaction changes control of the company and the parties' turnover exceeds the thresholds set by the Competition Board. Transactions below the thresholds do not require approval; this should be assessed when planning the transaction.
Would you like to discuss this service? Schedule a meeting with us — the first meeting is free of charge.
Schedule a meeting