The issue of buying out a shareholder often arises in companies facing conflicts, changes of direction, termination of cooperation, succession or restructuring. But: shares are private property. You cannot simply buy out a shareholder - you need a legal basis for doing so.
When is a buyout possible?
There are three main routes:
1. Voluntary consent
The shareholder concerned agrees to transfer his shares. The parties negotiate price, conditions and regulations (e.g. payment terms) and record this in a Share Purchase Agreement (SPA).
2. Contractual basis (articles of association/shareholder agreement)
Sometimes there are clauses in articles of association or shareholder agreements that make a buyout possible or mandatory, for example through:
- Offer schemes
- Put or call options
- Exit clauses in case of retirement, long-term illness or conflicts
- Dispute resolution (arbitration or binding advice) if deadlock occurs
Note that such agreements only bind the parties who signed them; new shareholders are not automatically bound.
3. Legal procedure through the courts
If voluntary or contractual routes do not provide a solution, there are legally defined procedures:
- Squeeze-out procedure
You can force a shareholder through the courts to transfer his shares if his behavior is detrimental to the interests of the company (e.g. mismanagement). To do this, you usually need to represent at least 1/3 of the capital. - Withdrawal/purchase
The shareholder himself can request a court buyout if he is structurally disadvantaged by fellow shareholders. - 95% buyout
If you already own at least 95% of the shares, in some cases you can force the remaining shareholders to transfer through the courts, provided a reasonable price is offered.
In all such proceedings, the court often appoints an expert to determine the value of the shares.
Practical tips for a smooth buyout
1. Know your starting position
Before you enter the conversation, carefully study the articles of association and shareholder agreement. You need to know your legal cards in order to operate strategically.
2. Have an objective valuation
If no clear valuation method has been agreed, have an independent expert perform the share valuation to limit discussion about the price.
3. Put all agreements in writing
Even with a voluntary buyout, it is essential to establish price, payment, guarantees and deadlines. Verbal agreements often lead to arguments afterwards.
4. Pay attention to tax structure aspects
The way the buyout is designed can have major tax consequences (e.g. box 2 tax, dividend tax). Early tax advice is crucial.
5. Don't forget the human factor
Buyouts often touch on emotions and interests. In conflict situations, it may be wise to use a specialized lawyer as a buffer and process facilitator.
6. Update your agreements periodically
Shareholder relations and company circumstances change. By exercising periodic review you avoid future surprises when buying out.
Case study from practice
In a concrete case, I assisted a DGA who had founded the company together with a second shareholder. When the mutual trust seriously waned, the other party took an unreasonable course - voluntary buyout turned out to come to nothing.
Because the articles of association included a clear call option in case of a dispute, the transfer of shares could be pushed through via arbitration. Thanks to prior agreements on valuation and payment, the buyout went relatively smoothly despite the conflict.
