Drag-along rights allow a majority shareholder to force minority shareholders to sell a business. The shareholder who goes through the saturation must give minority shareholders the same price and conditions as any other seller. Shareholder 1 wishes to remain a shareholder in the company only if the company achieves a fixed turnover after five years; If this is not the case, Shareholder 1 wants to withdraw. An option-to-sell clause in the shareholder contract gives that shareholder the right to request, at his choice, that the entity repurchase the shares at a predetermined price or according to a predetermined formula. All shareholders have rights to the financial and management reports of companies, which are usually presented annually. Large shareholders may be entitled to monthly or quarterly reports. Larger shareholders can also negotiate the right to access company documents, which can include company visits, interviews with company officials and the ability to copy records. An option-to-sell clause in a shareholder contract is a right, but is not an obligation to sell the shares at a certain price in the event of a high event. In practice, an option-to-sell clause gives a shareholder the right to resell his shares to the company at a certain price at a certain price in the future, either a fixed amount or an amount determined by a formula.
For example, suppose there are two shareholders in the same company – shareholder 1 and shareholder 2. Shareholder 1 invests $10,000 in the company`s shares and shareholder 2 invests $15,000. Most disputes are ultimately settled out of court. However, there will be times when a dispute on a key issue cannot be resolved informally and the survival of the family business could be threatened. It may be difficult for family members to discuss the planning issues associated with the collapse of the business, but it is precisely this lack of willingness to deal with problems that present the greatest risk. Family members need to plan a clear conflict resolution strategy. The most useful instrument is a well-prepared shareholder pact. By forcing family members to deal with problems before starting business, the real process of preparing a shareholder pact can help prevent future conflicts. In order to promote effective communication and cooperation, family members may even opt for a mediator at this stage. The high rate of family business failure is due in part to a lack of planning for dispute and disagreement management. The tendency is often to think that there is a need for less planning in a family business.
Family members believe that they are on an equal footing in business and that conflicts can be resolved without the need for formal guidelines and structures.