Issue link: https://htpgraphics.uberflip.com/i/246991
Company Documentation Section 6 Permitted transfers These can be made without the need to offer to transfer shares first to other members. They commonly allow transfers within the same group of companies, to immediate family, family trusts and with Investor consent. (NB Provision will almost certainly be made for the compulsory transfer of such shares where a permitted transferee no longer has the relationship that makes it a permitted transferee. A common example of this is where a transferee subsequently leaves the transferor's group). At the spin-out stage, it is often simpler to prohibit any transfers by individuals without Investor consent. Compulsory transfers Even as a researcher founder/company founder in some cases you may be required by the Investor to offer your shares back to the company or other shareholders if you cease to have any material association with it. (The value of your shares may be determined by an independent assessor, such as a corporate finance accountant.) Sometimes the Investor may agree that this requirement can be reduced or waived if you are a founder and have spent a good length of time with the company following the investment. Compulsory transfers are triggered if, for example, a shareholder ceases to be an employee and/or director of the company. The basis for calculating the sale price of shares on a compulsory transfer must be fixed by the Articles. It may be based on the performance of the relevant employee or director or the length of time he/she has served. Performance-Based Test Distinguishes between good leavers and bad leavers (see also page 35). If a member of the management team is deemed a good leaver he/she may expect his/her shares to be valued at the higher of market value and the original cost of his/her shares. A good leaver will be defined but usually relates to when he/she ceases employment because of death, permanent incapacity or retirement at the normal retirement age. If he/ she is a bad leaver (ie not a good leaver) he/she may only get the lower of market value and the original cost of his/her shares. 40