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Alex J.
Alex J., Solicitor
Category: Law
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Experience:  Solicitors 2 years plus PQE
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My husband is a shareholder in the company he works for. He

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For Ben Jones:Hello there. My husband is a shareholder in the company he works for. He has signed a power of attorney document to allow his shares to be sold by the company during a 're-financing' process. He has been offered another job and so needs to hand in his notice very soon if he is to take up the new position at the time they want him. Will handing in his notice between the 'exchange' and 'completion' part of the share sale process jeopardise receiving the share asset increase?
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.

Hi, Thank you for your question and welcome. My name is ***** ***** my colleague has asked me to assist you. Is there a mechanism for valuing the shares in the articles of association or does the PoA contain a price at which the shares can be sold?

Customer: replied 1 year ago.
Hi AJ,Right.So in 2013 my husband invested in shares in his company. One of the statements of the investment were 'If you invest and then leave as an employee of the Group (for any reason) before an Exit, the EBT will repurchase your Interest at the price at which you bought it.'Early this year, shareholder employees were notified that the company was going to be 're-financed'. A 're-investment opportunity' was presented where the options were either to 'sell' or 're-invest' shares. At this point the company gave a summary to each employee, stating what shares were held, what their original value was, and giving a valuation of the shares at that point ($8.0 per share). My husband chose to 'sell' his shares and signed a PoA giving the trustees of the 'employee benefit trust (EBT)' to act on his behalf in connection with the sale of the EBT shares. The PoA does not appear to contain a price at which the shares can be sold.
It is very difficult for me to say if there are mechanisms for valuing the shares in the articles of association as I find it hard to interpret. There are may clauses that may be relevant, including 'exit provisions', 'call-rights employees' and 'fair market value'....I could forward the document to you if that would help.It seems that a lot rests on the definition of 'exit' and 'employee' in regards ***** ***** notice period. Currently we seem to be 'mid-exit' in between the exchange and (delayed) completion of the sale. Also, it is not clear whether it is the date of resignation that determines whether an employee is considered to have left, or the date of leaving at the end of the notice period. It would really help if you could clarify these points too.
Many thanks
Expert:  Alex J. replied 1 year ago.

Hi, Thank you. So the clear point to consider her is that if your husband leaves he will only receive what he invested. Does he currently have a signed contract obligated the purchaser of the shares to pay 8dollars a share? Kind regards AJ

Customer: replied 1 year ago.
Hi again AJ,No signed 'contract' or clear 'obligation'. The situation is:
He bought the shares in 2013 at $0.01 each. He signed the PoA on 25 Mar 2016 for the Trustees to sell the shares on his behalf.
On 10 Apr 2016 he was notified by email that 'the company had entered into a period of exclusivity with a private equity group who will replace the current financial sponsors'. The email also presented the 're-investment opportunity' and gave an 'estimated proceeds of the transaction if he were to sell' - where his shares were valued at $8.0 each. Then on 22 Apr he was notified by email that the transaction 'exchange of contracts' had occurred with the new private equity group. The deal still hasn't been finalized but he is required to give 3 months (12 weeks) notice and has been offered a new position starting in Sept.
Expert:  Alex J. replied 1 year ago.

Hi, Thank you. Normally an exchanged contract would mean there is an obligation to complete the sale. The issue I would be concerned about here is, have you actually seen a signed contract? Even with a power of attorney, your husband should still be party to our mentioned in the contract?

Customer: replied 1 year ago.
No he has not seen a signed contract. He didn't really expect to seeing as he had signed PoA and company is ~400 people.
Customer: replied 1 year ago.
he is only a beneficial owner of 'C' ordinary shares
Expert:  Alex J. replied 1 year ago.

Hi, Thank you. If they have given you a date for exchange - are they able to confirm a completion date?

Customer: replied 1 year ago.
As far as we know (thru verbal information passed from other colleagues) 1) the completion date will only be known once 'anti-trust steps have been completed' 2) there has been a delay due to a clerical error of one party involved in the anti-trust process 3) it is possible that the process may now be expedited.
Expert:  Alex J. replied 1 year ago.

Hi, Thank you. Until you know your husband has a contractual right to the proceeds and you have written confirmation, either by way of a draft contract or otherwise, I would be of the opinion that handing in his notice would jeopardize his right to the price proposed. The only way to tacitly find out without making it obvious that he intends to hand in his notice, is to ask whether the provisions of the shareholders agreement/articles still apply now there is an offer on the table? If he has C Class shares, do you have a description of the rights attached to those shares currently?

Customer: replied 1 year ago.
we have 'rules relating to EBT for C ordinary shareholders'. Under 'Call Rights' section there is this clause:With respect to any Beneficiary that is an employee of the Company or any of its
Subsidiaries in the event of the termination of employment of such Beneficiary, for
any reason, the EBT shall repurchase the C Ordinary Shares held by such Beneficiary
in exchange for the amount paid by the Beneficiary for the Interest.But would 'termination of employment' be dated by effective date of termination (EDT)? And if he hands in his resignation with full notice, wouldn't EDT be the date on which the notice expires ?(i.e. after a 3 month window, giving time for completion to hopefully occur).
Expert:  Alex J. replied 1 year ago.

Hi, Thank you. The date of termination is the date the notice expires. So the sale would have to be completed before the notice expires. If the notice expires and the sale is not complete he risks a call being made on the shares.

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Customer: replied 1 year ago.
Thank you. That has really helped to clarify where we are at.
Best regards