Celebrating 75 years this year, The Archers tells of the rural community grappling with everyday issues of country life. Key to the survival of the local community are the local businesses which include tea rooms, farmland and development potential. The current twist sees Justin (a shareholder in Berrow Land) seeking to sell his shares. There is limited buyer interest in the sale of shares, but he is keen to leave Ambridge. The plot has the potential for an investment consortium to acquire the shares or a local individual to do so. But, like everyday life, a new buyer could come into the picture and shake things up.
Whilst there is no specific reference to legal documentation, there are features within the storyline that would indicate that good advice has been given to the shareholders about future scenarios that the company, and its shareholders and directors, might face. One of those likely scenarios is the sale of shares. It sounds like there are sale conditions that have to be met. These are likely to be in the company’s constitution, being the articles of association of Berrow Land or a shareholders agreement.
Without pre-agreed conditions in place, Justin might be able to sell his shares:
- to anyone, including competitors, people that the other shareholders don’t know, or like, people who have unwelcome plans to develop the land or others which might threaten the continued existence of the Berrow Land company; and
- at any price, which will have a bearing on the value of the remaining shares held by the shareholders.
All very unsatisfactory, creates stress and anxiety and of course, is great radio drama. Thankfully, The Archers is fictious. But real-life situations are well depicted in this successful and long running programme about life in and around Ambridge.
The plot suggests that the sale of the shares must meet certain conditions before being approved and that Justin’s buyer is not automatically acceptable. This might be directing the attentive listener to the possibility of consent rights or veto rights contained within the company’s constitution. These help to protect the continuing shareholders, and the business, from having an unwanted influence within the business.
Further, the sale price is not yet settled; perhaps a process is being followed. A defined valuation mechanism within the constitution can help establish a value of shares using a methodology that is agreed in advance, thus reducing the tensions. Often, reference is made to an independent third-party professional to establish an objective value using specific criteria.
Thirdly, the characters are careful about discussing the sale; negotiations are conducted privately. This is not just about dramatic tension; confidentiality is not automatic or implicit. The private conversations might suggest that there are provisions within the company’s constitution governing the need to exercise confidentiality about the company, it’s business as well as the affairs of the shareholders.
In summary, a good shareholders agreement and articles of association can reduce the dramas around the sale of shares. Like an insurance policy, better to have the legal documents in place before the event, than after the wheels come off. Contact our Corporate team if you wish to discuss shareholder agreements or selling of shares as mentioned in this article.