If you, as a business owner, want to sell your shares, you usually have to start by talking to your partner.
Often the articles of association state that you cannot sell your shares to just any person. You are restricted from doing so if there is a blocking arrangement in the articles of association.
This regulation states that you must first offer your shares for sale to the co-shareholder. If the partner in question is not interested in the shares, then you are free to approach another buyer.
Why does the blocking arrangement exist?
This arrangement was devised to preserve the organization's corporate culture and processes. If a totally new person can suddenly step into the business, then the continuity of the business is at risk.
If you transfer your shares to another shareholder, you make sure that all the good remains. The staff will not be confronted with any big surprises, the processes are known to the management, and in addition, the other shareholder often likes having more control.
Transfer of shares
Therefore, if the blocking arrangement applies, you often have to deal with these options:
- The offering arrangement forces you to first offer the shares to your partner. If he does not want to take over the shares, then you can approach another party;
- An approval arrangement, where the transfer of your shares must first be accepted by the current board of the organization.
If it is clear that you will transfer your shares to a co-shareholder, then the sales process will go a lot faster than if you sell to a third party.
