Buying shares from an existing shareholder means acquiring not just a commercial interest but a share of everything the company has ever done, including liabilities it may not have disclosed. A secondary acquisition needs careful due diligence and a purchase agreement that actually carries the risk back to the seller.
You find out what the company is actually carrying before your money moves, not after settlement.
Your position as an incoming minority holder is written down and agreed while you still have leverage.
The share register, the transfer and the shareholders agreement all say the same thing about what you own.
Buying shares from an existing holder transfers that holder’s entire position to you, history included. It is a different transaction from subscribing for new shares, and the difference is where most of the risk sits.
Knowing the business commercially is not the same as knowing what it owes. Due diligence looks for the liabilities, contracts and disputes that do not appear in the numbers you have already seen.
Buying shares means you acquire the company with everything attached to it. Buying the business means you acquire chosen assets and leave the company’s history behind. The risk profiles are opposite.
A minority holding without an agreement leaves you with very little say and no reliable exit. The moment to negotiate one is before your money moves.
A straightforward acquisition runs a few weeks from first review to completion. What extends it is almost always something due diligence uncovers, which is the point of doing it.
The due diligence and documentation that protect your investment matter as much as the price you negotiate. Getting it right at the outset costs a fraction of rectifying it later.
You have agreed in principle to buy shares from an existing shareholder. The price feels right and the business looks promising. But you have not yet investigated what liabilities the company is carrying, what the other shareholders’ rights are, or what restrictions apply to the shares you are about to own.
You have found an opportunity to buy into an existing company. The seller is willing, the price is agreed in principle, and everyone would like it done before the end of the quarter. The momentum of a well-priced deal is exactly what tends to shorten the investigation that would have protected you.
You are not trying to renegotiate the commercial deal. You want to know what you are actually buying, what happens if the other shareholders disagree with you, and what you can do about it if the company turns out to be carrying something nobody mentioned.
A buyer who discovers an undisclosed liability after settlement, or whose warranties are too narrow to cover the loss, has very little left to work with. The seller has the money. The company has the problem. And the other shareholders, whose rights were never written down, now have opinions about how you run it.
These disputes are expensive out of proportion to what a proper investigation would have cost, and they tend to arrive at the point when the business most needs everyone pulling the same way.
We start with a thorough review of the company’s legal documents, key contracts and regulatory position, so the price you agreed is tested against what is actually there.
Then we prepare the share purchase agreement with warranties that reach the things due diligence could not settle, and negotiate the shareholders agreement that governs your rights from the day you complete.
By the end you own a position you understand, recorded in documents that agree with each other, with a route out that you chose rather than one you were left with.
We run legal due diligence on the target, review the existing shareholder arrangements, and tell you what should change the price or the terms.
We prepare the purchase agreement with the warranties and protections it needs, and negotiate the shareholders agreement that secures your rights coming in.
We manage completion, make sure the transfer is properly executed, and confirm the share register reflects what you actually own.
We have acted for share buyers across a wide range of transaction types, from small closely-held businesses to larger multi-shareholder companies with complex governance arrangements.
We know the momentum of a well-priced deal can quietly reduce the rigour of the investigation, and we know what it costs when it does. So we keep the investigation proportionate to the risk rather than to the enthusiasm.
You will speak to the lawyer doing the work, and you will get a fixed or capped quote before it starts.
Six principles we hold to, whatever you bring us and however long it takes.
We listen carefully to understand what you want to achieve, then step you through the advice and the documents.
We pass on as much as we can, so you can make your own informed decisions.
We only do what we are good at, so you never pay for our learning.
Someone is always available to answer your question or point you the right way.
A fixed or capped quote for advice and documents, so you do not carry the price risk.
We are in it for a front row seat to witness your success, not for our egos.
Buying shares from an existing shareholder means acquiring a share of everything the company has ever done. We make sure you know what that is before your money moves.
Read more about share acquisitions, due diligence and shareholder rights and how ADLV Law can help.
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