Over the past few months we have seen a number of investment issues, and we therefore felt that it was timely to publish a reminder of issues that can arise in this area.
If you are advising clients who are entering into an investment in a private company, it’s worth bearing in mind that there are more than just accounting and value considerations to bear in mind.
It might sound obvious but one initial step should also be to ensure that whoever is offering the shares up (whether it be by transfer or share issue) has the right to do so. Failure to follow due process (e.g. getting waivers of rights of pre-emption from existing shareholders or giving appropriate notices) could end up costing your client in legal fees and unwanted angst associated with the investment.
Similarly, if you client is looking to exit an investment they should ensure that they have followed due process in order to avoid any unwanted challenges from their co-investors.
The obvious places to look for such restrictions are in the company’s Constitution or an agreement signed by the investors such as a Shareholders Agreement or an Accession Deed.
We work in this area on a day to day basis and can help guide you or your client through the process. Don’t hesitate to contact us on our helpline – 02 8006 0830 – or by email if you would like to discuss this area of law in general, or if you have any clients who would like tailored advice or assistance.
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