2022 Exit Rights in Business Agreements

Original program date 01/13/22

A client investment in an operating business, particularly a minority stake, is only as good as its liquidity rights. If a client cannot readily sell his or her ownership stake at fair market value, it has little real value. The key to ensuring liquidity is contractually creating a private market for the ownership stake. This market can come in the form of requiring other stakeholders, including the majority owner, to buy the minority stake at a mutually agreeable price, or creating other mechanisms for selling the stake to third parties. Without these contract rights, a stakeholder has no liquidity and is stuck. This program will provide you with a practical to planning and drafting contractual liquidity rights in closely held companies. 

•    Planning and drafting liquidity rights in closely held companies
•    Counseling clients about the limitations and risks of liquidity in closely held companies 
•    Framework of alternatives for determining most appropriate liquidity rights 
•    “Texas standoff” or “Russian roulette” – opportunities, risks and tradeoffs
•    Drafting “tag-along” and “drag-along” rights – practical uses and drawbacks
•    How to think about valuing closely held ownership stakes 

Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for GAL Certification, ethics, elimination of bias or Kansas credit.