Planning ownership for future generations.
Caroline said goodbye to her brothers Louis, Charles and Timothy, and rushed to her car, very satisfied with the decision that had been made. They had agreed to develop a shareholders' agreement to secure the future ownership of the family business while giving some flexibility to individuals to sell shares. She could now go and visit her father Thomas Sages to share the good news.
Thomas Sages was a very successful entrepreneur who had transformed his first grocery store into a large supermarket chain over the past decades. He was in his late 80s now, and had initiated a conversation with his four children about the future of the family business.
Contrary to what he had expected, each of them had expressed the wish to become, or remain, a shareholder in the business as they wished to be in a position to pass on some shares to the next generation. The Sages family circumstances (Thomas’ two marriages and prior distribution of shares to his second wife and their children; Caroline’s husband David’s ownership; and a transaction between David and Timothy), would result in an uneven distribution of the shares between the four children upon the demise of Thomas and his second wife Martina.
NB: the managers of the group owned 10%
The four siblings were aware that there may be a requirement for them, or their children, to sell part or all of their shares in the future. It was therefore important to plan ahead, while at the same time trying to avoid the entry of an external investor. They had considered the following:
While they had listed their preferred options, they now needed to further discuss the matter with their trusted advisor.
– What advice would you give the Sages siblings regarding their shareholders’ agreement?
– What is your own experience in this area? Do you have examples of best practice?
Download the full case study here (PDF 1.50MB) and review the key learning points associated with this case study by downloading the Key learning points (PDF 468KB).