Exit clause in a shareholders agreement: planning the sale or listing

Sample clause

a shareholders agreement for Blue Wren Aged Care Software Pty Ltd, a fictional Sydney company owned by two founders and Harbourview Growth Fund, a fictional investor that came in during 2026

19. Exit 19.1 The Shareholders intend that an Exit occurs between 1 July 2031 and 30 June 2032 (the Exit Window). 19.2 An Exit means a sale of all the Shares, a sale of all or substantially all of the Company's business and assets, or a listing of the Company's Shares on a recognised securities exchange. 19.3 If no Exit has been agreed by 1 July 2031, the Board must, at the request of Harbourview Growth Fund, appoint an independent corporate adviser, chosen from a shortlist of three approved by both Founders, to run a sale process for the Company. 19.4 Each Shareholder must act in good faith and use reasonable endeavours to cooperate with that process, including by providing information and signing documents on customary terms. 19.5 Nothing in this clause obliges a Shareholder to sell its Shares at a price below Fair Value, or to give warranties other than as to title and capacity, except under clause 12 (Drag Along). 19.6 On an Exit, proceeds are distributed in accordance with the Constitution.

Sample wording, not legal advice.

Variants

What to negotiate

• Obligation or intention

  Founders resist a promise to sell by a date, because the right price may not exist when the date arrives. Investors want more than a statement of intention. Most clauses land on a stated window, an obligation to run a process with an independent adviser, and a price floor, rather than a guarantee that a sale will actually complete.

• Who controls the process

  The party that picks the adviser and approves the buyer list shapes the outcome. Investors want the right to trigger and oversee the process once the window opens. Founders want a say in choosing the adviser and protection against a sale to a competitor that would end their roles on poor terms.

• Liquidation preference and the waterfall

  The headline price matters less than how proceeds are divided. Investors with preference shares want their money back first, sometimes a multiple of it, before ordinary shareholders share the rest. Founders negotiate non participating preferences and caps, because a large preference can leave the team with little from a modest sale.

• Founder terms after the exit

  Buyers often want founders to stay for a transition period, sometimes with part of the price deferred as an earn out. Investors are wary of founders taking value through employment terms rather than the share price. Clauses often require any founder benefit linked to the sale to be disclosed and approved before it is agreed.

The risk of leaving it out

Without an exit clause there is no agreed expectation about when or whether the company will be sold, and a minority investor has no statutory right to force a sale. The investor's practical routes out are selling its stake privately, usually at a discount, or pressing for a sale in a way that sours the relationship with the founders.

Exit events and what each involves

A trade sale of all the shares gives every holder cash or buyer shares at once, usually with drag along support. A sale of the business and assets leaves the company holding cash that then reaches shareholders through a distribution, buy back or winding up, with different tax results. A listing makes shares tradable, often with founder and early investor shares held in escrow for a period. A secondary sale lets one investor sell its stake to a new investor while the company carries on. A merger or court approved scheme of arrangement suits larger companies. A buy back of an investor's shares needs the company to have capacity. A managed winding up is the last resort.

The legal machinery for each route

A sale of all the shares in a private company depends on every holder agreeing, which is why an exit clause works hand in hand with drag along rights. A sale of the business is a board decision, often with shareholder approval under the constitution, and returning the proceeds must satisfy the Corporations Act rules on distributions and capital. A listing requires a disclosure document and compliance with the securities exchange's rules. Whatever the route, the liquidation preference in the constitution then decides who receives what.

Where it sits in a generated document

A generated shareholders agreement carries the exit clause as a numbered clause near the end of the share transfer provisions, with the exit window, the adviser process and the price floor as sub clauses that refer to drag along by number. Dates and thresholds are written in as content. The document does not cite the Corporations Act or exchange rules.

Documents that carry this clause

Shareholders agreement templateA veterinary diagnostics company has just taken $1.5 million from one seed fund. The founders keep 80 percent between them, so the whole agreement turns on a single number: the 75 percent consent threshold that puts the investor on one side of every decision that matters.Joint venture agreement template with contributions and splitAn unincorporated joint venture has no company to fall back on, so everything a company structure would supply has to be written down. This one puts two builders together for a single $14.6 million refurbishment, splits it 55/45, and sets out who funds it, who decides, how a deadlock breaks and how either of them gets out.Co-ownership agreement template for shares, costs and exitA co-ownership agreement is what two people write before they buy together, not after something goes wrong. This one covers a $780,000 unit held 60/40 as tenants in common, with tables for who paid what at settlement, who pays what each month, and how either of them gets out.

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