Agreeing a shareholder exit without a petition.
Independent mediators and advisory counsel for share buyouts and shareholder exits. Price, payment terms, guarantees and announcements settled in one confidential day.
Most shareholder disputes end the same way, with one shareholder buying out another. The argument is rarely about whether an exit should happen, because by the time solicitors are involved both sides usually accept that it should. The argument is about price, how the price is funded, what happens to director loan accounts and personal guarantees, and who says what to staff, customers and the bank.
An unfair prejudice petition under section 994 of the Companies Act 2006 will eventually deliver a buyout order, but it takes many months, turns largely on competing valuation evidence, is heard in public and often costs a material percentage of the value in dispute. A mediated exit produces the same commercial outcome, on terms the parties choose, without the company's affairs being aired in a public judgment.
Clerk&Counsel places practitioners on shareholder exits in two roles. As advisory counsel for one shareholder, reviewing the articles, the shareholders agreement, the accounts and the valuation and giving a written view on entitlement and realistic settlement range. As a neutral mediator where both sides want the exit agreed. The roles are never mixed on the same dispute.
Exit situations we mediate.
- Founder exits where one founder wants out and the others want to continue trading.
- Minority buyouts following exclusion from management or withheld dividends.
- 50/50 deadlock resolved by one party buying the other or by a demerger.
- Retirement and succession exits in family companies, including gifts to the next generation.
- Investor exits, drag along and tag along disputes and disputed pre-emption processes.
- Exits driven by illness, relationship breakdown or a divorce settlement.
- Company purchase of own shares under Part 18 of the Companies Act 2006.
- Departing director shareholders where employment terms and share terms have to settle together.
How price is actually bridged.
Valuation is the single largest gap in most shareholder exits. One side values on a multiple of maintainable earnings, the other on net assets, and both adjust for the departing shareholder's contribution. In a quasi-partnership a court would frequently value a minority holding without a discount, which is a powerful point for a minority shareholder and a reason for the majority to settle rather than litigate.
The other levers are usually more effective than arguing over the multiple. Deferred consideration over 24 or 36 months, an earn out linked to retained customers, an interest rate on the deferred element, security over shares or a charge, and set off against a director loan account balance all create room to close a gap that looks unbridgeable on a single number.
Tax matters as much as price. Whether the departing shareholder obtains capital treatment, whether business asset disposal relief is available, and whether a purchase of own shares meets the trade benefit test are all points that should be checked with an accountant before the day, so the deal signed at the mediation is one that survives contact with HMRC.
What a signed exit agreement covers.
- The price, the deposit and the deferred payment schedule with interest and security.
- Resignation as director and employee, and treatment of any employment claims.
- Release of personal guarantees given to banks, landlords and suppliers.
- Settlement of director loan accounts and any overdrawn balance.
- Restrictive covenants on the departing shareholder and any agreed carve outs.
- Company car, pension, phone and other benefits.
- Mutual non disparagement and an agreed statement to staff, customers and lenders.
- Companies House filings, stock transfer forms and stamp duty on the transfer.
Instructing a mediator or advisory counsel.
The process is short and the fee is fixed before anything is committed:
- Send a short outline of the company, the shareholdings and the proposed exit.
- We run conflict checks and shortlist a mediator or advisory counsel with the right sector experience.
- A written fixed fee is issued, normally shared between the parties for a mediation day.
- Position statements and a core bundle go to the mediator and the day is listed, usually within two to four weeks.
Specialist areas within this practice.
- Shareholder dispute mediation
The main shareholder mediation service.
- Director disputes
Removal, deadlock and director duty claims.
- Shareholder and partnership disputes barristers
Counsel for unfair prejudice petitions and derivative claims.
- Business partner dispute mediation
Unincorporated partnership exits and dissolution.
- Commercial mediation
The wider commercial mediation service.
Need to agree a shareholder exit?
Send a short outline of the company, the shareholdings and the proposed terms. A clerk will come back with mediator or advisory counsel options and a fixed fee.
Common questions.
How is a shareholder exit price agreed?
By negotiation against a valuation, not usually by a court. The starting point is any valuation mechanism in the articles or shareholders agreement, then an accountant's valuation of the business, then adjustments for director loan accounts, dividends already taken and any minority discount. Mediation is where those adjustments are traded.
Can a shareholder be forced to sell their shares?
Only where the articles or a shareholders agreement contain a compulsory transfer provision, or where a court orders a buyout at the end of an unfair prejudice petition. Absent one of those, an exit has to be agreed, which is exactly what a mediated day is for.
Should the company or the other shareholders buy the shares?
It depends on funding and tax. A company purchase of own shares under Part 18 of the Companies Act 2006 needs distributable reserves and the correct procedure, and capital treatment needs to be checked with an accountant. A personal purchase avoids those constraints but has to be funded personally. Both routes are commonly explored on the day.
How long does it take?
Two to four weeks to arrange and normally a single day to settle, with completion following once the share purchase agreement and stock transfer forms are drawn up.
What does it cost?
A written fixed fee for the mediation day, agreed before instruction and normally shared equally between the parties. Advisory work is quoted as a fixed fee for a written opinion or an agreed hourly rate.
Are you a barristers' chambers?
No. Clerk&Counsel is a clerking agency and a trading style of Found First Digital Ltd. We place independent barristers regulated by the Bar Standards Board and non-barrister mediators, and the instruction runs directly between you and the practitioner.