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Shareholders Agreement Shotgun

There are many methods of valuation, from discounted cash flow to net assets. None of this is “fair” and depending on what is used, the valuation for the business will vary wildly. When shareholders use different methods, the share price offered does not reflect the true “economic” value of the company. Right of pre-emption (ROFR): ROFR is a mechanism to ensure that existing shareholders (or anyone else) have the right to buy shares of an outgoing shareholder. When a shareholder wishes to sell and receives an offer from a third party, it is normally mandatory to communicate the offer to the other shareholders if the shareholder intends to accept it. The other shareholders have the first option to buy on the same terms or to authorize the sale to the third party. A chevrotine clause is a provision frequently used in a shareholders` agreement. It is also commonly referred to as the “buy-sell” clause. In essence, a “chevrotine” or “buy-sell clause” offers a legal and contractual mechanism for a “divorce” shareholder in the event that a chevrotine clause is most often used to force a partner (or partner) to buy a partner offering or sell its shares to the offering partner. A chevrotine clause can be included in the shareholders` agreement of a partnership and is sometimes called a “purchase-sale contract”. That is, there is a certain inherent injustice in the structure of shotguns, strong compared to those who can afford to pay for the shares of the other shareholder. This is something that must be taken into account when deciding whether or not to include such provisions. But even this bias is, to some extent, offset by the value that each shareholder brings to the company, because even a wealthy and greedy shareholder would be reluctant to remove someone who gives the company intrinsic and irreplaceable value.

A shareholder director may be contacted by a third party who is willing to buy the company at a much higher price than the shareholder should buy out the other investors. He or she could keep the offer secret, perform shotgun services and profit from it. Put/Call option: A put/call option is a variant of a mandatory buy/sell clause, which is sometimes used instead of a shotgun clause….