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Shareholder Exit Agreement

Shareholder Exit Agreement Template for South Africa

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Key Requirements PROMPT example:

Shareholder Exit Agreement

"I need a Shareholder Exit Agreement for a minority shareholder leaving our technology startup to pursue other interests, with a gradual payment structure over 12 months and provisions for protecting our intellectual property and maintaining confidentiality."

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Document background
The Shareholder Exit Agreement is a crucial document used when a shareholder wishes to or is required to exit their shareholding in a South African company. This agreement is essential in various scenarios including retirement, strategic divestment, dispute resolution, or succession planning. It provides a structured framework for the exit process, encompassing share valuation methods, payment mechanisms, and necessary warranties. The document must comply with South African legislation, particularly the Companies Act 71 of 2008, and may need to address B-BBEE considerations, exchange control regulations for foreign shareholders, and tax implications. The agreement typically includes detailed procedures for completion, confidentiality obligations, and post-exit arrangements, making it a vital tool for managing shareholder transitions while maintaining business continuity and legal compliance.
Suggested Sections

1. Parties: Identification of all parties to the agreement, including the exiting shareholder(s), remaining shareholders, and the company

2. Background: Context of the agreement, including current shareholding structure and reason for exit

3. Definitions and Interpretation: Definitions of key terms used throughout the agreement and rules of interpretation

4. Exit Trigger Events: Specific circumstances that trigger the right or obligation to exit

5. Share Valuation: Method and process for determining the value of the shares being transferred

6. Payment Terms: Details of how and when payment for shares will be made, including any installment arrangements

7. Completion Process: Step-by-step process for executing the exit, including timing and documentation requirements

8. Warranties and Representations: Standard warranties from both the exiting shareholder and the company/remaining shareholders

9. Confidentiality: Obligations regarding confidential information before, during, and after the exit

10. Notices: Process and requirements for giving formal notices under the agreement

11. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and entire agreement

Optional Sections

1. Tag-Along Rights: Used when other shareholders should have the right to join the exit on same terms

2. Drag-Along Rights: Included when majority shareholders need the right to force minority shareholders to join the exit

3. Non-Compete Provisions: Required when the exiting shareholder needs to be restricted from competing post-exit

4. Continuing Obligations: Needed when the exiting shareholder retains certain obligations post-exit

5. Intellectual Property Rights: Important when the exiting shareholder has been involved in IP development

6. Employee/Director Resignation: Required when the exiting shareholder holds positions in the company

7. Tax Indemnities: Included when specific tax risks need to be allocated between parties

8. Dispute Resolution: Optional detailed alternative dispute resolution procedures

Suggested Schedules

1. Share Capital Structure: Details of the company's current shareholding and share classes

2. Valuation Methodology: Detailed explanation of the agreed share valuation method

3. Completion Checklist: List of all actions and documents required for completion

4. Form of Transfer Instruments: Pro forma share transfer forms and other required documentation

5. Outstanding Loans or Obligations: Details of any shareholder loans or other financial obligations

6. Required Regulatory Approvals: List of necessary regulatory or third-party approvals

7. Intellectual Property Register: Register of IP rights affected by the exit

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
Agreement
Board
B-BBEE
Business Day
Companies Act
Company
Completion
Completion Date
Confidential Information
Consideration
Directors
Effective Date
Encumbrance
Exit Notice
Exit Price
Fair Market Value
Financial Year
Group
Independent Expert
Intellectual Property Rights
Material Adverse Change
MOI
Parties
Purchase Price
Remaining Shareholders
Sale Shares
Shareholder Loans
Shareholders Agreement
Signature Date
Subsidiary
Transfer
Trigger Event
Valuation Date
Valuation Method
Warranties
Clauses
Interpretation
Definitions
Share Transfer
Purchase Price
Payment Terms
Completion Requirements
Conditions Precedent
Warranties and Representations
Confidentiality
Non-Compete
Non-Solicitation
Tag-Along Rights
Drag-Along Rights
Valuation
Due Diligence
Regulatory Compliance
Tax Matters
Dispute Resolution
Governing Law
Force Majeure
Assignment
Notices
Costs
Breach
Termination
Amendment
Waiver
Severability
Entire Agreement
Further Assurance
Independent Legal Advice
Good Faith
Indemnification
Survival of Provisions
Relevant Industries

Financial Services

Technology

Manufacturing

Professional Services

Retail

Mining

Healthcare

Agriculture

Real Estate

Construction

Media and Entertainment

Energy

Telecommunications

Relevant Teams

Legal

Finance

Corporate Governance

Compliance

Risk Management

Board Secretariat

Corporate Affairs

Investor Relations

Strategy

Treasury

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Corporate Lawyer

Financial Director

Managing Director

Board Member

Compliance Officer

Investment Manager

Corporate Governance Officer

Risk Manager

Business Development Director

Strategy Director

Shareholder Relations Manager

Industries
Companies Act 71 of 2008: Primary legislation governing company operations in South Africa, including provisions for share transfers, shareholder rights, and corporate governance requirements
Income Tax Act 58 of 1962: Regulates tax implications of share transfers, capital gains tax considerations, and other tax-related matters affecting shareholder exits
Competition Act 89 of 1998: May be relevant if the transaction size meets certain thresholds, requiring merger control clearance or notification
Exchange Control Regulations: Applicable when foreign shareholders are involved, governing cross-border transactions and foreign currency transfers
Financial Intelligence Centre Act 38 of 2001: Ensures compliance with anti-money laundering regulations in share transfer transactions
Consumer Protection Act 68 of 2008: May be relevant if any of the shareholders are considered consumers under the Act
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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