Corporate Law in Bite-Size Chunks: Selling a company with multiple shareholders
Selling your company with multiple shareholders? Find out why it can turn into a logistical nightmare and how a Power of Attorney can prevent last-minute chaos.
Navigating company sales with multiple shareholders
A clear trend in the current market is the rise of company sales involving multiple shareholders. This often stems from equity raised through several funding rounds, friends and family investments, or employee share option schemes. While these structures support growth, they can introduce complexity when it comes time to sell.
Don't miss a thing, subscribe today!
Stay up to date by subscribing to the latest Corporate insights from the experts at Fieldfisher.
Subscribe nowWhy more sellers mean more problems
Multiple sellers bring varying levels of experience. Some may be seasoned investors, others may be relatives or employees unfamiliar with corporate transactions. In addition, some sellers may be giving full warranties and indemnities while others may not. Coordinating signatures, managing expectations, and ensuring all parties understand their role can be time-consuming. In some cases, sellers may only learn of the sale shortly before completion. Appointing a lead seller as attorney under a Power of Attorney ("PoA") can help bridge the gap between sellers not involved in the deal and the wider advisory team, ensuring the transaction stays on track.
Who leads the way
A PoA allows a trusted person to act on behalf of others. In multi-seller deals, this can streamline completion by enabling one person to sign documents and take necessary actions. It is especially useful when sellers are less available, in different locations, or unable to act due to illness or other reasons. It helps avoid delays and ensures that all required documents are signed correctly and on time.
What to keep in mind
Before relying on a PoA, check that it has been properly signed as a deed, is still valid, and clearly sets out what the appointed person is authorised to do. Make sure the person giving the PoA understands what they are agreeing to and whether or not they need to take their own legal advice.
Final thoughts
Multi-seller transactions are manageable with the right planning but without sufficient foresight they are a nightmare. A PoA backed up by a sensible shareholder coordination plan can simplify the process, but it must be handled with care. If you would like to hear about our experience with these types of transactions, please get in touch.
