Shareholders' agreements: what to check before you sell.
Almost every startup with outside investors has a shareholders' agreement. Before selling a single share, read it: it often says who may buy, when, and on what terms. Here are the clauses that matter most.
Right of first refusal (pre-emption)
Before selling to an outsider, you may have to offer your shares to existing shareholders, at the same price and terms. They usually have a few weeks to answer. If they decline, you can sell to your buyer.
Approval clause
The board or the shareholders may have to approve a new shareholder. A refusal can block a sale to a buyer they do not want, such as a competitor.
Tag-along (co-sale)
If a shareholder sells, others may have the right to sell alongside, on the same terms. A buyer for your shares may end up buying more than planned, or none at all.
Drag-along
If a majority accepts an offer for the whole company, minority shareholders may be required to sell too. This matters less for a small secondary sale, but shapes what buyers are willing to pay.
Lock-up
Some shares cannot be sold for a set period, often after a funding round or for the founders.
Vesting and leaver clauses
Founders' and employees' shares are often earned over time. If you leave, good and bad leaver clauses may oblige you to sell some shares back, sometimes at a low price. See Departing co-founders.
Information and confidentiality
Agreements usually limit what you may disclose about the company. That is one reason why a declaration on Uback stays confidential: it reveals nothing about the company to anyone but the local partner, with your consent.
In practice
Read your agreement, list the clauses that apply to your shares, and talk to a lawyer before committing to any buyer. A good adviser will check them first.
Uback provides no legal, tax or investment advice. Each situation depends on your shareholders' agreement and on applicable law: check them with your own advisers.
More for shareholders: Sell your shares Secondary sales Departing co-founders