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Pre Emption Rights In Shareholders Agreement

Pre Emption Rights In Shareholders Agreement Template for South Africa

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Key Requirements PROMPT example:

Pre Emption Rights In Shareholders Agreement

"I need a Pre-Emption Rights In Shareholders Agreement for my South African technology startup that maintains our Level 2 B-BBEE status, with specific provisions for protecting minority shareholders and valuation mechanisms suitable for high-growth companies."

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Document background
The Pre-Emption Rights In Shareholders Agreement is a fundamental document used in South African corporate governance to regulate and control the transfer of shares within private companies. This document becomes essential when companies need to maintain control over their ownership structure, protect existing shareholders' interests, and ensure orderly transfer of shares. It is particularly relevant in contexts where maintaining specific ownership ratios is crucial, such as B-BBEE compliance requirements or family-owned businesses. The agreement must comply with South African legislation, particularly the Companies Act 71 of 2008, and typically includes detailed mechanisms for share valuation, transfer procedures, and dispute resolution. It's commonly implemented during company formation or when updating existing shareholder arrangements to provide better protection and clarity regarding share transfers.
Suggested Sections

1. Parties: Identification of all shareholders and the company, including registration numbers and addresses

2. Background: Context of the agreement, existing shareholding structure, and purpose of the pre-emption rights

3. Definitions and Interpretation: Key terms including 'Shares', 'Fair Market Value', 'Offer Notice', 'Transfer', and interpretation rules

4. Pre-emption Rights: Core provisions establishing shareholders' rights of first refusal on share transfers

5. Transfer Notice Requirements: Procedure and requirements for issuing transfer notices to other shareholders

6. Valuation Mechanism: Method for determining share price and appointment of independent valuers if required

7. Acceptance and Payment Procedures: Timeframes and processes for accepting offers and completing payment

8. Permitted Transfers: Exceptions to pre-emption rights such as transfers to family members or affiliated companies

9. Default Provisions: Consequences of failing to comply with the pre-emption provisions

10. Dispute Resolution: Procedures for resolving disputes regarding pre-emption rights

11. General Provisions: Standard clauses including notices, amendments, governing law, and jurisdiction

Optional Sections

1. Tag-Along Rights: Include when minority shareholders need protection to join in sales by majority shareholders

2. Drag-Along Rights: Include when majority shareholders need the right to force minorities to join in a sale

3. Share Classes: Include when different classes of shares have different pre-emption rights

4. B-BBEE Compliance: Include when maintaining B-BBEE ownership levels is crucial

5. Put and Call Options: Include when shareholders want specific rights to force sales or purchases

6. Death and Incapacity: Include specific provisions for succession planning

7. External Financing: Include when shares may be used as security for external financing

Suggested Schedules

1. Current Shareholding Structure: Detailed breakdown of existing shareholding percentages and share classes

2. Transfer Notice Form: Template form for shareholders to use when initiating a share transfer

3. Deed of Adherence: Standard form for new shareholders to sign up to the agreement

4. Valuation Methodology: Detailed procedures for share valuation

5. Permitted Transferee Requirements: Specific criteria and conditions for permitted transferees

6. Resolution Procedures: Detailed steps for dispute resolution and deadlock breaking

7. Company Constitution: Copy of the company's constitution/memorandum of incorporation

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Acceptance Notice
Acceptance Period
Affiliate
Agreement
B-BBEE
Board
Business Day
Company
Competing Business
Completion Date
Confidential Information
Deed of Adherence
Directors
Effective Date
Encumbrance
Fair Market Value
Financial Year
Independent Expert
Initial Shareholders
Material Change
Memorandum of Incorporation
Non-selling Shareholders
Offer Notice
Offering Shareholder
Ordinary Shares
Parties
Permitted Transfer
Permitted Transferee
Pre-emption Notice
Pre-emption Rights
Prescribed Price
Professional Valuer
Proposed Transfer
Proposed Transferee
Related Party
Remaining Shares
Sale Shares
Selling Shareholder
Share Capital
Shareholders
Shares
Tag-along Notice
Tag-along Right
Transfer
Transfer Notice
Valuation Date
Valuation Method
Clauses
Interpretation and Definitions
Pre-emption Rights
Transfer Restrictions
Notice Requirements
Valuation Mechanisms
Payment Terms
Completion Procedures
Permitted Transfers
Prohibited Transfers
Tag-Along Rights
Drag-Along Rights
Share Transfer Mechanics
Default Provisions
Anti-dilution Protection
Dispute Resolution
Confidentiality
Competition Restrictions
B-BBEE Compliance
Amendment Procedures
Deadlock Resolution
Exit Provisions
Force Majeure
Governing Law
Jurisdiction
Notices
Severability
Entire Agreement
Costs and Expenses
Waiver
Assignment
Relevant Industries

Private Equity

Family Businesses

Professional Services

Manufacturing

Technology and Software

Real Estate

Mining and Resources

Financial Services

Healthcare

Retail and Consumer

Agricultural Business

Construction and Engineering

Relevant Teams

Legal

Corporate Governance

Executive Leadership

Board of Directors

Finance

Compliance

Corporate Affairs

Risk Management

Investment

Shareholder Relations

Relevant Roles

Chief Executive Officer

Company Director

Corporate Lawyer

Legal Counsel

Company Secretary

Chief Financial Officer

Compliance Officer

Corporate Governance Officer

Investment Manager

Shareholder Relations Manager

Business Development Director

Risk Manager

Board Member

Managing Partner

Financial Director

Industries
Companies Act 71 of 2008: Primary legislation governing company operations in South Africa, including provisions for share transfers, shareholder rights and obligations, and company structure requirements
Consumer Protection Act 68 of 2008: While primarily focused on consumer protection, its provisions may be relevant if the shareholders agreement involves any consumer-facing aspects or if any shareholders are considered consumers under the Act
Competition Act 89 of 1998: Relevant for ensuring pre-emption rights do not create anti-competitive effects or result in prohibited practices in the market
Income Tax Act 58 of 1962: Governs tax implications of share transfers and disposals, including capital gains tax considerations when pre-emptive rights are exercised
South African Common Law: Principles of contract law that govern the formation and enforcement of agreements, including requirements for valid contracts and remedies for breach
Broad-Based Black Economic Empowerment Act 53 of 2003: May be relevant if the pre-emptive rights need to consider B-BBEE ownership requirements and maintain certain ownership ratios
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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