9 Important Questions About Unanimous Shareholder Agreements

7. How can the USA affect a Shareholder Exit?

A USA will often provide for a number of ways for shareholders to exit the company. These may include:

• Put or Call Options: A Put or Call Option is typically exercisable after a specified period of time or upon the occurrence of a specific event. The obligation to purchase shares under a Put Option could fall to all the other shareholders on a pro rata basis, or just to the company. Events which may trigger a Put or Call Option may include the death, incapacity, bankruptcy of a shareholder, the retirement or termination of employment, or a material breach by the shareholder of the USA.
• Shotgun Clause: In a Shotgun scenario, a shareholder delivers an offer: (i) to buy the shares of another shareholder; and (ii) an offer to sell their shares to the other shareholder on identical terms. The other shareholder receiving the offers must decide which of the two offers to accept. This occurs most often in cases involving two shareholders each holding 50% of the issued and outstanding shares. Where a company has more than two shareholders, the drafting of a Shotgun Clause becomes much more complex. The uncertainty for both parties typically acts as an incentive to reach a negotiated settlement to any disagreement.
• Sale to a Third Party: A sale to a third party will be governed by the provisions, described above, restricting share transfer including Right of First Offer, Right of Frist Refusal, Piggyback Rights, and Drag-Along Rights.

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