Visitor Register Now

Login
Logout
My profile

Exiting your business:
Exiting a partnership or minority shareholding

As a partner or minority shareholder, you may not be able to sell your shares or business interest to whomever you like as there may be restrictions included in the articles of a company, a partnership deed or shareholders agreement. Similarly other shareholders or partners may be required to, or have first call on acquiring your interest. As part of your exit strategy you should find out whether there are any such provisions, and consider putting partnership or shareholders agreements in place if you do not have them already.

Related literature:

Partnership agreements

Shareholder agreements

To illustrate the problems that can arise without an agreement, consider the following case study:

One of our clients was a partnership but owned its property through the medium of a limited company. The property had increased significantly in value. A departing partner owned 25% of the shares of this company and had contributed 25% of the cost of the property to the company. Because the basis of valuation of the shareholding had been set out in the shareholders agreement, he was able to sell the shares to the other shareholders for 25% of the value of the property. If there had been no such agreement, then the shares would have been worth considerably less than that figure, due to the large discount that is generally applicable to minority shareholdings.

It may be that, when you exit from a partnership, you are not entitled to receive any capital from the partnership. In that case your exit planning should revolve around the need to make alternative financial provisions to give you security in retirement or in the event of a forced exit through ill health, maybe. Business protection is covered in more detail in the Runnng a business section.