An appeal option allows, in certain circumstances, one shareholder to force another to sell his shares. This is useful for large shareholders who want to acquire the shares of a minority shareholder that creates a dead end. An appeal option agreement generally contains standard statements from each party that the performance and execution of the contract is not contrary: the company may grant the appeal option for the issuance of new shares or a shareholder for the transfer of existing shares. A beneficiary (an option holder) and a donor (the existing company or shareholder) are parties to the option agreement. The fellow may be a natural or legal person. An appeal option agreement is for the funder (also known as the „option holder“) to grant the right, but not the obligation to buy shares in a company. The option generally applies through a predetermined number of shares at a certain price (sometimes referred to as „exercise“ or „strike price“). If the option holder does not exercise his right for a certain period of time, the option (and associated rights) will be extinguished. Below are the most important terms, which generally include an appeal option agreement between the fellow and the funder. Before executing an appeal option agreement, the parties must consider other business documents to determine whether additional authorizations are required.
Suppose there are two shareholders in a registered joint venture company – A and B. Shareholders A is concerned that B will not refuse the shareholder contract and will not be able to remedy this deficiency. In order to reduce the risk of loss for A, a shareholders` pact may provide a put option mechanism that allows A to sell the shares in B and leave the company in the event of a default. In this case, A has the right to require B to repurchase A`s shares at a specified price in the event of default, and B may be retained in the business. Since the options for sale and appeal impose obligations on the parties without their consent, the triggers for these clauses must be developed with great care. A price mechanism must also be included in the shareholders` pact with an agreed minimum price for this clause. If they are faced with a stalemate, the simplest solution may be to liquidate the company. This clause may encourage shareholders to break the deadlock, as the sale of fires cannot have the effect of selling the business for what it is worth. As a result, shareholders may be encouraged to break the deadlock or sell their shares, as this would put them in a better financial position.
As the name suggests, this is the date the call option takes effect. This may be the day the fellow signs the call option agreement at another predetermined date in the future. The effective date should not be linked to the exercise date (i.e.