When a company guarantees its shares, it lists the names of shareholders and the number and type of shares that each shareholder holds at the time of signing the shareholder contract. This guarantee is advantageous if shareholders want some confidence in the number of shares in the group and who owns them. Over time, the personal circumstances of each shareholder can change significantly. This can have a huge impact on the transaction in the absence of a shareholders` pact. For example, the shares of a capital company are considered assets, so that after the death of a shareholder, the deceased`s shares become part of their estate and are subject to the will of the deceased. In other words, in the absence of a shareholder pact dealing with a shareholder`s shares after the death, the spouse or children of the deceased could, overnight, become your new business partner – a scenario that may not be desirable for other shareholders. A mandatory repurchase provision may be included in the shareholder contract, which provides that if a shareholder dies, the other shareholders or the company are forced to purchase the shares of the deceased and the executor or manager of the estate is required to sell the shares. In addition to the repurchase provision, a share valuation mechanism can be agreed and included at the time of the shareholder`s death. There are also some risks associated with implementing a shareholder agreement in some countries. A SHA also often grants a right of pre-emption to shareholders, so that if the company does not or only partially exercise its repurchase rights, non-ceding shareholders have the primary right to acquire those shares in proportion to their ownership of existing shares. A SHA should clearly state the detailed mechanism by which shareholders exercise their pre-reference rights and how the shares acquired in this way must be paid. In the case of a voluntary transfer, unsold shareholders may have the opportunity to acquire more than their proportionate share shares if one of the other unsold shareholders does not exercise its prior decision-making rights.
However, in the case of an automatic transfer, shareholders who do not sell generally have to acquire all the „offered“ shares.