Institutional investors generally participate in a business when they invest and generally want to be able to sell profit within two to six years. While the additional capital is valuable in that it allows the company to grow much faster (which increases the value of minority shareholders` investment), it has the disadvantage that the investor is able to sell to another party in the short or medium term, the choice on which minority shareholders are unlikely to have a choice. In addition, if non-solvency counterparties are to be included, minority shareholders may also wish for a mechanism to verify the fair price offered to their shares and to be above the minimum price level. As an investor, you are often looking for all the shares of a company, but it is possible that some minority shareholders will refuse to sell their shares. By agreeing to a De Bring Along clause, minority shareholders are required to offer their shares to the investor. Marking along the provision is intended to ensure that small shareholders are not left behind if a large shareholder decides to leave the company. (To learn more about protecting minority shareholders, click here.) As a general rule, a shareholders` pact prohibits a shareholder from selling his shares without giving other shareholders the reasonable opportunity to buy them. These provisions are called “pre-emption rights.” The objective of the rights is to provide a majority shareholder with liquidity, flexibility and a simple way out. Given that many buyers of a target company want 100% control of the transaction and rarely agree to allow a minority shareholder to retain a minority stake, it would be difficult for a majority shareholder to accept an offer if minority shareholders do not cooperate and block the sale of a business. For example, two founders of a company each with 50% of the total shares may agree to sell 75% of their stakes to an institutional investor (.
B, for example, business angel, venture capital fund or venture capital fund). The (almost) controlled positions would allow them to end up as minority shareholders with much less control in the management of the business. In the event of the sale of a majority stake by the shareholder (s) who owns a certain majority of the shares, a drag-along right allows the majority seller shareholder to obtain an exit by forcing the remaining minority shareholders to sell their shares on the same terms to a third-party buyer in good faith. Although rights are strongly favoured vis-à-vis majority shareholders because they are prevented from participating in the company, these clauses also ensure that minority shareholders are treated in the same way as majority shareholders. Some shareholders, such as Z.B. Venture capitalists or fishers may require that the provisions be conditional and limited with delay or have certain exceptions. Minority shareholders thus capitalize on the sale of a company organized by a majority shareholder. The first option could expose minority shareholders to the risk that the majority shareholder, by selling a significant majority stake (but not all of the stakes), could obtain a near-complete economic exit without the mark being triggered along the provisions. A mechanism that works well for one business may be totally unsuitable for another if differences in relationships, business resources, financial resources of the parties and other relevant considerations are taken into account.