Shotgun Clause


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Shotgun Clause

A provision in some shareholder or partnership agreement stating that if one shareholder offers to buy out the company at a certain price, the other shareholder(s) either must accept the offer or buy out the first shareholder at the same price. This is most common when two shareholders each own 50% of a business.
References in periodicals archive ?
Additionally an exchange mandated shotgun clause has been added to the terms of the warrants.
Any agreement should also address the issue of how to buy one shareholder out from the company through the use of some form of buy/sell provision or "shotgun clause".
If any deal is to emerge at this stage, it must be agreed on friendly terms due to the "Shotgun Clause" placed on BBH, the joint venture between Scottish and Newcastle and Carlsberg, whereby if one party makes a bid for the joint venture, the other party is entitled to make a counter-bid.
Assuming the shareholders are of relatively equal negotiating strength, a shotgun clause tends to ensure the liquidity of each shareholders interest.
Issues may arise in a shotgun clause where the shareholders have materially different negotiating strength.
For example, USAs often have provisions called shotgun clauses. Shotgun clauses permit a shareholder to require the other shareholders to either accept an offer to sell their shares or buy the shares of the offering shareholder.