Q&As

How can a person who holds shares in a private limited company contractually agree terms with a third party which provide for the transfer of such shares for no consideration upon the earlier to occur of: (a) the passage of a specified period of time; and (b) that person’s death?

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Published on LexisPSL on 21/09/2018

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • How can a person who holds shares in a private limited company contractually agree terms with a third party which provide for the transfer of such shares for no consideration upon the earlier to occur of: (a) the passage of a specified period of time; and (b) that person’s death?
  • Share transfer mechanisms

Share transfer mechanisms

Is it possible for a person who holds shares in a private limited company to agree by contractual arrangement terms providing for the transfer of such shares for no consideration upon the earlier to occur of (a) the passage of a specified period of time and (b) that person’s death?

You may wish to consider the following Precedents and their associated drafting notes as a possible means of achieving the aims set out in the Q&A:

  1. Call option agreement—this document can be used by a company’s shareholder to grant an option to purchase shares in the capital of the company, to be exercised by the proposed transferee of the shares, ie a right the shareholder transferor gives to the proposed transferee of the shares to purchase the shares held by the transferor after a specified period of time (defined in the call option agreement as the ‘Intial Period’). It should, therefore, be possible to adapt the wording in this precedent to specify the period and events which will trigger the ability of the transferee to exercise the option and/or to provide for the option to be exercisable for nominal or no consideration. It may, howe

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