5 Tips for Buying Out Your Shareholders

On Behalf of | Jan 15, 2014 | Uncategorized |

5 Tips for Buying Out Your Shareholders

In October of 2013, Michael Dell, owner of Dell, succeeded in buying out his publicly held company in a $24.8 Billion deal that allowed him to start running his company again privately. Dell is satisfied with what has been labeled as one of the nastiest tech buyouts in history, because he doesn’t have to report to and get approval from shareholders. He can now run the business he founded in his dorm room privately, and do as he sees fit. Although it was a challenging, and expensive, process from start to finish, Dell is pleased with his decision and he’s also confident other publicly held companies will follow in his footsteps.

What are Buyout Agreements?

According to Nolo.com, buy-sell agreements do not revolve around buying and selling companies. They actually control when and how shares in a corporation can be sold or bought. Sometimes buy-sell agreements are referred to as shareholders’ agreements or stock agreements. The types of decisions a buyout agreement might control would be the following:

  • Whether a shareholder who is leaving the company must be bought out
  • Who is allowed to buy stock from a departing shareholder
  • Prices that will be paid certain shareholders’ interest in the corporation
  • Any other events that might initiate a buyout

5 Tips for Buying Out Your Shareholders

Buying out your shareholders can be tricky on many levels. If this is a path you are interested in taking, here are 5 tips:

  1. Make sure you have proper legal representation.
  2. Make sure you understand all your rights and restrictions in the buyout process.
  3. Be aware of the situations or events that might initiate your opportunity for a buyout.
  4. Consider how you will fund the buyout, i.e. investors, payment plan, etc.
  5. Take into consideration how this will effect the future of your company.

East Aurora Business Law Attorneys

The attorneys at Hall Ricketts Gurbacki, P.C. are experienced in business law and can help you with your buyout and shareholder agreements. Contact us online or call 716-652-0828 to schedule a consultation today.