Before going to lawyers to discuss/draft the revised articles I am hoping to 'read around' potential solutions and am hoping that the AW community can point me to companies that have considered this and found a solution (I can look at the solution in those companies articles - unfortunately not if they are 'hidden' in shareholder agreements).
Background:
- The company (for reasons not relevant here) is going to end up with about a third of the shares in an (existing) Employee trust.
- Key staff will be allocated shares from the Trust.
- Unless the whole of the company is sold the 'employee' shares may only be sold back to the trust, the company or (with pre-emption) other holders of that class of share.
- Business does not have a grow/flog/move-on strategy, so it is highly likely that employee shareholders will retire, move on to other roles elsewhere etc.
- There will be good leaver (dead/retire), bad leaver (dishonest, sacked) and 'intermediate leaver' clauses (e.g. moving onto new job)
The Challenge:
- How to value the shares of good/intermediate leaver?
- How to avoid somebody 'in the know' jumping ship at a high valuation to the detriment of those who remain?
- How to handle it if the trust/company doesn't have enough cash at the time to pay for the shares?
Ideas so far:
- Valuation - by the Board with an 'expert mechanism' - I like ones where either side can call for an expert in a dispute but the loser pays. Valuation is future weighted (past is no guarantee of the future etc.)
- Payment - payment made current year and next 2 based on performance during those years (implied is that there is an ebitda multiple in the valuation)
- Inability to pay - switch to loan note at bank of England base rate, but right to dividends if any declared.
Is is this a solved problem - if so, I would be grateful for any pointers to company articles of association or any prior discussions (AW search I tried found nothing).
Thanks in advance.
Phil