Selling shares without shareholder agreement

Hello there. I would be happy to help you with this.

In most private companies in England and Wales, you cannot simply sell your shares to an outsider without the other shareholders having a say. However, the exact rules depend entirely on the paperwork set up for your company.

The legal position:

Shares are technically your personal property, but they almost always come with strict conditions attached. To find out exactly what you can and cannot do, you need to look at two main documents. The first is the Articles of Association, which is the company's main rulebook. The second is a Shareholders' Agreement, if you and the others ever signed one.

These documents almost always include a rule called a right of first refusal, occasionally known as pre-emption rights. This means that if you want to sell your shares, you are legally required to offer them to the existing shareholders first. You must usually offer them in proportion to the number of shares those people already own.

You can generally only sell to an outside buyer if the existing shareholders decide not to buy your shares. Even then, you usually cannot offer an outsider a better price or better terms than you offered your fellow shareholders.

On top of this, the directors of a private company usually have the power to refuse to register a transfer of shares to a new person. This means if you find an outside buyer, the board of directors might still be able to block the sale.

Important missing information:

To know for sure what you can do, we would need to review your specific Articles of Association and any Shareholders' Agreement. It would also be important to know if you are currently a director or an employee of the company. Sometimes, deciding to leave your job or resign as a director automatically forces you to sell your shares back to the company or the others under good leaver or bad leaver rules.

Practical next steps:

1. Gather your documents. Download your company's current Articles of Association from Companies House or ask the company secretary for them. If a Shareholders' Agreement exists, find your copy of that too.

2. Check the rules. Read through the documents looking for sections about transferring shares. This will tell you the exact process, how the shares should be valued, and how much notice you need to give.

3. Have an informal conversation. Before triggering a formal legal process, it is often best to have a quiet chat with the other shareholders. If they all agree that you can sell to someone else, or if one of them wants to buy you out directly, the remaining shareholders can pass a special resolution to waive the normal rules and allow the sale to go ahead smoothly.

4. Send a formal notice. If an informal agreement is not possible, you will need to follow the exact steps in your company rulebook. This usually begins by sending a formal transfer notice in writing to the company, stating how many shares you want to sell and at what price. You should be entirely sure you want to sell before taking this step, as sending a transfer notice is usually legally binding and cannot be withdrawn once sent.