Issue link: https://htpgraphics.uberflip.com/i/246991
Company Documentation Section 6 Time-Based Test Provides that if a member of the management team ceases to be employed by the company before an agreed date (irrespective of the circumstances) his/her shares will be valued as if he/she were a bad leaver, whereas if he/she leaves after the agreed time period he/she would always be deemed a good leaver. General transfer mechanism The normal way to transfer shares involves the serving of a notice of intended transfer on all other members. They get an opportunity to acquire the proportion of them which is equal to their current proportionate holding of shares in the company. There will also be a pricing mechanism. Exit arrangements Exit arrangements may be covered by the Articles. Two issues which are usually dealt with are drag along and tag along rights. Drag Along A "drag along" provision compels a shareholder to sell, where an offer has been received from a third party for a specific percentage of the equity share capital of the company. That percentage is usually a controlling interest. Such a provision can stop an uncooperative shareholder frustrating other members from realising their investment or seeking a disproportionate share of the proceeds as a "ransom" position. These are sometimes known as "come along" rights. Tag Along A "tag along" provision, in simple terms, provides that a shareholder who has received an offer for his/her shares must also obtain the same offer for the other shareholders in the company. They must give all shareholders the opportunity to exit at the same time (and at the same price) before being able to sell his/her shares to that third party. This is particularly important for shareholders with relatively modest percentage holdings as, without tag along rights, they could simply be left holding shares, whilst the controlling parties sell their shares. These are also sometimes confusingly known as "come along" rights. 41