Minority Shareholder Protection

Tracey runs a small, successful marketing business. She was approached by a customer who wanted to enlist her marketing services for his company. However, he could not afford to pay her, so Tracey and her customer came up with an idea.  Instead of paying Tracey for her services, the customer would actually hand over a small stake in his company.  Tracey would be purchasing shares in the customer’s company as an investment.

Tracey was interested by this, as she was sure that she could significantly improve her customer’s company through a well thought-out marketing campaign, which she was good at doing. This should in turn, increase the company’s share value and provide her with a good return on her investment.

However, Tracey had never done anything like this before and was unsure about what to expect or even how to go about investing in another small business. She was sure it was a good idea, but was worried about how to protect her investment as a minority shareholder.

After trying to find the answer for herself, Tracey approached Mark Tromans at Hibberts. Tracey and Mark exchanged a handful of emails and a meeting was scheduled for the following week.  Mark was down-to-earth. He listened to Tracey’s concerns and provided clear-cut advice about how the investment transaction should be structured and most importantly, how Tracey’s minority interest in the company could be protected using a shareholders’ agreement.

Tracey found the advice to be incredibly useful and instructed Mark to get to work on preparing a shareholders’ agreement that would protect her interest and also help to make sure that the company itself was properly managed going forward.

The agreement that Mark put together was fair, but contained robust minority shareholder protections. Mark negotiated the agreement with Tracey’s customer on Tracey’s behalf and the parties were soon able to sign the final form agreement.

By having Mark in her corner, Tracey could focus on the excitement of embarking on a new venture, safe in the knowledge that her investment was protected, rather than worrying about what might go wrong.