Expertises connexes

The presence of a mandatory offer clause in a shareholders’ agreement ensures that shares held in a company are mandatorily offered for sale to the other signatories of the agreement, upon the occurrence of certain predetermined triggers. This is one of the most important clauses in a shareholders’ agreement. It differs from the first refusal clause in that the offer to sell is only made in the event that a shareholder wishes to dispose of his shares. On the contrary, the mandatory bid ensures that shares are automatically put up for sale in certain circumstances, regardless of the will of the person holding the shares. The circumstances in which the clause applies can be multiple.

How can a mandatory offer clause benefit the shareholders of a company? By automatically triggering the offer of the shares for sale, the clause protects the other signatories to the agreement where they would like a shareholder to dispose of his or her shares in specific cases where the shareholder does not necessarily wish to do so. Since the offer is made first to the other signatories to the agreement, the mandatory bid provides the same benefits as the right of first refusal, even in the absence of the consent of the shareholder to whom the mandatory bid clause applies. These potential benefits include the ability of the signatories to retain a proportionate shareholding in the business and the preservation of the private nature of the business.

In the event that the mandatory offer results from the death of the shareholder, the clause obliges the shareholder’s estate to offer the shares for sale to the signatories of the agreement first.

In the event that the mandatory offer arises from the withdrawal from the business, the agreement must provide for situations in which a signatory will automatically be considered to have withdrawn from the business of the company. Among these situations, one can find the hypothesis of a signatory contravening restrictive clauses, such as the non-solicitation clause, the non-competition clause or the confidentiality clause. Other circumstances provided for in the shareholders’ agreement may also constitute a withdrawal from the business, such as the signatory’s bankruptcy, disability, fraud, etc.

Bernier Fournier’s team has extensive knowledge and experience in commercial law and will work with you and your partners to determine the situations leading to the withdrawal of business to be included in your shareholders’ agreement. Our professionals will also work with you to define the terms and conditions for the sale of shares in the event of the death or withdrawal of a signatory, taking into account the financial and legal interests of the company and its shareholders.