Glossary

A · B · C · D · E · F · G · I · J · L · M · N · O · P · Q · R · S · T · V · W

A

A Consent

Written consent, given before the company acts, by the holders of most of the A Shares. Ferris holds them all, so A Consent means Ferris's written yes. Every reserved matter needs it, together with B Consent. Definition: A Consent · Clause 5.1 · Chapter 4

A Directors and B Directors

The directors each funding owner appoints. Ferris, which holds the A Shares, appoints up to two A Directors, and Aldous & Wren, which holds the B Shares, up to two B Directors. Each owner appoints and removes its own directors by written notice to the company. Clause 4.2 · Clause 4.3 · Chapter 3

A Shares, B Shares and C Shares

The three classes of £1 shares: 55,000 A Shares for Ferris, 35,000 B Shares for Aldous & Wren and 10,000 C Shares for Dr Sayer. Every share gets the same dividend and one vote. The classes differ only in the rights the agreement gives each one. Clause 3.1 · Clause 3.3 · Chapter 2

Affiliate

A company in the same group as another: one that controls it, is controlled by it or has the same controller. A drag works only for an offer from a buyer outside the sellers' group. A contract with an owner's group worth over £50,000 a year needs both consents. Definition: Affiliate · Clause 13.1 · Chapter 8

Articles

The company's articles of association: its public rulebook, filed at Companies House. They bind the company and every member, and change only by special resolution. Where they clash with the shareholders' agreement, the agreement wins between the owners. Definition: Articles · Clause 21.1 · Chapter 1 · Chapter 10

B

B Consent

Written consent, given before the company acts, by the holders of most of the B Shares, in practice Aldous & Wren. Every reserved matter needs it, together with A Consent. A board minute saying the B Directors agreed is not B Consent. Definition: B Consent · Clause 5.1 · Chapter 4

Bad Leaver

The manager, Dr Sayer, if she is dismissed for cause, resigns before the third anniversary of Completion, or breaks her promise not to compete. A bad leaver sells every C Share at £1, or at Fair Value if that is lower. Definition: Bad Leaver · Clause 16.5 · Chapter 9

Budget

The company's yearly spending plan, approved by Ferris and Aldous & Wren as a reserved matter. The managing director presents a draft by 31 January, and the two owners approve it by 28 February. Capital spending the approved budget provides for needs no further consent under item 5. Definition: Budget · Clause 8.2 · Chapter 4 · Chapter 6

Business Day

A weekday, other than a public holiday, when banks in London are open. Most deadlines in the agreement are counted in business days, such as the 10 days to answer a consent request. Mediation is the exception, because its 30 days are calendar days. Definition: Business Day · Chapter 3 · Chapter 5

Business Plan

The company's plan for its first three financial years, summarised in Schedule 5. Its first year is the first budget. Adopting or changing the plan needs the consent of both funding owners, as Reserved Matter 6. Definition: Business Plan · Schedule 5 · Chapter 6

Buy-Sell Notice

The last step for ending a deadlock before winding up. One owner names a single cash price per share, and the other must either buy its shares or sell its own at that price. A recipient that does not choose within 30 business days is treated as selling. Clause 6.5 · Chapter 5

C

Casting vote

A second vote that lets a chair break a tie. The chair of this board has none, at the board or at any committee. So a tied vote fails, and the company carries on under its approved plan and budget. Clause 4.6 · Article 16 · Chapter 3

Cessation Date

The day the manager's employment with the company ends, for any reason. Her shares stop vesting, she is treated as offering them all for sale, and Fair Value is set as at that day. Definition: Cessation Date · Clause 16.4 · Chapter 9

Change of Control

Someone who did not control an owner at Completion gaining control of it. For Ferris or Aldous & Wren, that counts as an offer of all its shares to the other at Fair Value. The sale of Aldous & Wren to a private-equity fund in 2028 was one. Definition: Change of Control · Clause 12.3 · Chapter 7

Completion

30 April 2026, when the shareholders' agreement, the Business Transfer Agreement and Dr Sayer's service agreement were signed together. None of the three takes effect unless all three are signed. The vesting dates and the other anniversaries in the agreement count from Completion. Definition: Completion · Clause 2.1 · Chapter 1

D

Deadlock Event

The trigger for the deadlock steps in clause 6. It happens when a reserved matter is refused at two board meetings at least 20 business days apart. It also happens when a board meeting and its adjourned meeting both have no A Director, or no B Director, present. Definition: Deadlock Event · Clause 6.1 · Chapter 5

Deadlock Notice

The notice that starts the deadlock steps. Ferris or Aldous & Wren may serve it within 20 business days after a Deadlock Event. A meeting of the chief executives follows, then mediation, then a possible buy-sell notice and, six months on, winding up. Clause 6.2 · Chapter 5

Deed of Adherence

The deed in Schedule 3 by which a newcomer agrees to be bound by the shareholders' agreement. A buyer of shares joins as a holder of its class, and no transfer is registered until it signs. A new controller of an owner joins with duties but no rights. Schedule 3 · Clause 10.4 · Chapter 7

Dilution

An owner's share of the company shrinking because new shares are issued and it buys none. It keeps every share it had, but each is a smaller part of the company. Dilution is the cost of declining an emergency issue of shares. Clause 7.5 · Chapter 6

Drag-along

The right of owners holding at least 75% of the shares to make the others sell to their buyer, at the same price and on the same terms. Ferris alone, with 55%, cannot drag. Only Ferris and Aldous & Wren together can, so only Dr Sayer can ever be dragged. Clause 13.1 · Article 14 · Chapter 8

E

Emergency Equity

New shares the company offers for cash when it needs money it cannot borrow or find itself. Starting a round and setting its price both need A Consent and B Consent. Every owner is offered its share, and an owner that does not buy is diluted. Definition: Emergency Equity · Clause 7.5 · Chapter 6

Exceeding

The word every money limit in Schedule 2 uses. It means strictly more than, so borrowing that brings the total to exactly £1,000,000 is not caught, but one pound more is. Figures are tested without VAT, and related deals are added together. Schedule 2, item 4 · Clause 5.3 · Chapter 4

Exclusive jurisdiction

Only the courts of England and Wales may decide a dispute about the agreement, so a claim started anywhere else is itself a breach. Ferris wanted private arbitration. Aldous & Wren preferred the courts, which cost the parties less, and won the point. Clause 22.8 · Clause 22.7 · Chapter 10

Exit

A sale to an outsider of shares carrying more than half the votes, a sale of substantially all the business, or a listing on a stock exchange. On an Exit all the manager's unvested shares vest just before it, and she sells on the same terms as everyone. Definition: Exit · Clause 16.6 · Chapter 8

F

Fair Value

The price per share when shares must move and no buyer has named one. An independent valuer values the whole company, with no discount for a small holding and no premium for control, and divides by the number of shares. A value of £16,000,000 made each share worth £160. Definition: Fair Value · Schedule 4 · Chapter 8

Funding Proportions

The split of the £1,800,000 shareholder loans between the two lenders, at £20 for every A or B Share. So Ferris lends £1,100,000 and Aldous & Wren £700,000. Dr Sayer lends nothing. Definition: Funding Proportions · Clause 7.2 · Chapter 6

G

Good Leaver

The manager, if she leaves through death, ill-health, redundancy, dismissal other than for cause, or resignation on or after the third anniversary of Completion. If a bad leaver reason also fits, she is a bad leaver. A good leaver gets Fair Value for vested shares and £1 for the rest. Definition: Good Leaver · Clause 16.5 · Chapter 9

I

IPO

An initial public offering: the admission of the shares to trading on a stock exchange. It needs A Consent and B Consent, and no Sale Process may run while one is pursued. On an IPO the three classes become one and the agreement ends. Clause 15.3 · Clause 20.1 · Chapter 2 · Chapter 8

J

Joint venture

A company owned by partners who each put in something different and each expect a say. Here a listed logistics group put in cash, a family business two cold stores, and an engineer her work and her software. Recital (A) · Chapter 1

L

Lock-in Period

The first three years after Completion, to 30 April 2029, when no owner may transfer a share. A move within the owner's group, or a transfer the agreement requires, is still allowed. For the B Shares the lock-in was extended to 30 April 2030. Definition: Lock-in Period · Clause 10.2 · Chapter 7

M

Managing Director

The director who runs the company day to day: Dr Imogen Sayer. She sits on the board because of her job, not by an owner's appointment. Appointing or removing her needs both funding owners' consent, so neither can remove her alone. Clause 4.4 · Schedule 2, item 10 · Chapter 3

Mediation

The third deadlock step, after the chief executives' meeting. One independent mediator, chosen and paid by both owners, helps them agree but decides nothing. The mediation ends after 30 calendar days if nothing is agreed. Clause 6.4 · Chapter 5

N

Nominal value

The face value of a share: £1 for every share in this company. It is not the price. Ferris and Aldous & Wren paid £100 a share, while Dr Sayer paid the nominal value. Clause 1.2(b) · Clause 3.1 · Chapter 2

O

Ordinary resolution and special resolution

The two voting thresholds at a shareholders' meeting. An ordinary resolution needs more than half the votes, so Ferris's 55% passes one alone, including one to remove a director. A special resolution needs 75%, so Aldous & Wren's 35% can block a change to the articles. Chapter 1 · Chapter 10

P

Pari passu

Equally, with no class ahead of another. The A, B and C Shares get the same dividend and the same return of capital per share, including C Shares that have not yet vested. Clause 3.2 · Clause 9.3 · Chapter 2

Permitted Transfer

A move of all an owner's shares to a wholly-owned company in its own group. It is allowed at any time, even during the lock-in, and the new holder signs a Deed of Adherence. If that company is about to leave the group, it must first transfer the shares back. Clause 12.1 · Clause 12.2 · Chapter 7

Pre-emption

The co-owner's right to buy first when Ferris or Aldous & Wren wants to sell. The seller gives a Transfer Notice, and silence for 20 business days counts as refusal. Only then may the seller sell to an outsider, within three months and at no lower price. Clause 11 · Clause 11.2 · Chapter 7

Procure

To use your votes and other rights to make the company do something, as far as the law allows. The agreement needs the word because a company cannot give up powers the Companies Act gives it. Its shareholders can, though, promise each other how they will vote. Clause 1.2(d) · Clause 21.3 · Chapter 10

Q

Quorum

The smallest attendance at which the board can decide: two directors, including an A Director and a B Director, present throughout. A meeting without a quorum is adjourned for five business days. If the adjourned meeting also has none, that is a Deadlock Event. Clause 4.5 · Article 8 · Chapter 3

R

Register of members

The company's own list of who holds its shares. A buyer becomes a member only when it is entered there. Every percentage in the agreement counts the 100,000 shares on the register, because no option or convertible exists. Clause 1.2(c) · Clause 3.1 · Article 12 · Chapter 2

Reserved Matter

One of the 14 decisions in Schedule 2 that the company may take only with A Consent and B Consent, whatever the board votes. Nine apply at any size. Five apply only above a money limit, such as borrowing exceeding £1,000,000. Definition: Reserved Matter · Schedule 2 · Chapter 4

Restrictive covenants

The manager's promises for 12 months after she leaves: not to compete in the South West of England or South Wales, and not to approach customers or senior staff. Each promise is separate, so a court can cut one that goes too far. They survive the end of the agreement. Clause 17 · Clause 20.3 · Chapter 9

Russian roulette

The nickname for the buy-sell notice. One owner names a single price per share without knowing whether it will end up buying or selling at it. So it must name a price it can live with either way. Clause 6.5 · Chapter 5

S

Sale Process

From 30 April 2031, Ferris or Aldous & Wren may make the board look for a buyer through an independent adviser. It is a right to start a sale, not to finish one. No owner has to accept any offer. Clause 15.1 · Clause 15.2 · Chapter 8

Share premium

The amount paid for a share above its nominal value. Ferris and Aldous & Wren paid £100 for each £1 share, so £99 of each is premium. The share premium account is £8,910,000. Clause 3.1 · Schedule 1, paragraph 2 · Chapter 2

Shareholder

With a capital S, a party to the agreement while it holds shares: Ferris, Aldous & Wren, Dr Sayer and anyone who signs a Deed of Adherence. “A Shareholder”, “B Shareholder” and “C Shareholder” each mean the holder of that class. The company signs too, but is not a Shareholder. Clause 1.1 · Chapter 1

Shareholder Loan

A loan by Ferris and Aldous & Wren to the company under the £1,800,000 facility. The loans are unsecured, carry fixed interest of 6% a year, and must be repaid in full before any dividend. They do not count towards the £1,000,000 borrowing limit. Definition: Shareholder Loan · Clause 7.1 · Clause 7.3 · Chapter 6

Shareholders' Agreement

The private contract between the three owners and the company, signed at Completion. It is private, makes the owners act, is confidential and can be enforced between the owners. Between them, it wins over the articles. The Parties · Clause 21.1 · Chapter 1

Shares

The A, B and C Shares, and any other shares the company issues: 100,000 at Completion, each with a face value of £1, fully paid. Definition: Shares · Clause 3.1 · Chapter 2

Sweat equity

Shares issued to a manager at nominal value and paid for by the work she will do. Dr Sayer paid £10,000 for shares that would have cost £1,000,000 at the others' price. That is why her shares vest and carry leaver terms. Clause 2.3 · Chapter 2 · Chapter 9

T

Tag-along

The right of every other owner to join a sale of shares carrying more than half the votes, counting any the buyer already holds. The buyer must offer them the same price and terms. It is Dr Sayer's main protection on a sale. Clause 14.1 · Clause 14.3 · Chapter 8

Transfer Notice

The offer by which an owner's shares move under the agreement. A seller gives one, stating the shares and its price. One is also treated as given, at Fair Value, on a change of control and when the manager leaves. Definition: Transfer Notice · Clause 11.1 · Clause 11.4 · Chapter 7

V

Variation

A change to the words of the agreement. It needs the signatures of Ferris and Aldous & Wren, and Dr Sayer's too if it harms her rights as C Shareholder. A consent, which uses the agreement as written, and a waiver, which excuses one occasion, are not variations. Clause 22.3 · Chapter 10

Vested Shares

The manager's C Shares that have vested: 2,500 on each of the first four anniversaries of Completion. Vesting changes nothing on the register. It sets the price she is paid for each share when she leaves. Definition: Vested Shares · Clause 16.2 · Chapter 9

W

Waiver

Giving up a right on one occasion without changing the agreement. Ferris waived its right to buy Aldous & Wren's shares after a change of control, on two terms: a deed by the new owner and a longer lock-in. Delay in using a right is never a waiver. Clause 12.4 · Clause 22.3 · Chapter 7 · Chapter 10

Winding up

Closing the company and selling what it owns, the last resort of the deadlock steps. If a dispute is unresolved six months after a deadlock notice and no buy-sell notice was served, either funding owner may require it. Every owner must then vote for it. Clause 6.6 · Schedule 2, item 13 · Chapter 5