Selling a shareholding — divesting your stake in the company
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Selling a shareholding is something different from selling a company. You are not divesting a business but a position within a circle of shareholders — with all the rights attached to it, and all the restrictions the articles of association impose.
That does not make the matter smaller, only different. Whoever holds the majority sells control. Whoever holds a minority sells an expectation. Both can be sold — on very different terms.
What you are actually selling
The value of a stake does not follow from the percentage alone, but from what the buyer can do with it.
Majority shareholding
Whoever gives up more than 50 % transfers control over day-to-day decisions. The price is based on the proportionate company value, frequently with a premium for control. For the buyer this is the standard case of a company acquisition — the process largely follows the one described under selling your company.
Minority shareholding
Below 50 % it becomes more complicated. The buyer acquires a position without decision-making power: they can neither appoint the management nor force distributions nor influence the timing of a later sale. The price therefore regularly sits below the arithmetic share of the company value.
What reduces the discount
What matters are the rights that are sold along with the stake. A tag-along right when the majority exits, a veto on fundamental transactions, a binding distribution mechanism or a seat on the advisory board change the value of a minority considerably. Where these rights are missing, what is being sold is a hope.
The first step is the articles of association
Before buyers or price are discussed, it has to be clarified whether — and to whom — you are allowed to sell at all.
Transfer restrictions (Vinkulierung)
Most GmbH articles make the transfer of shares subject to the consent of the shareholders’ meeting. Without that consent the transfer is void. Whoever looks for a buyer before knowing where consent stands is negotiating over something they may not be able to deliver.
Rights of first refusal and tag-along obligations
Co-shareholders frequently hold a right of first refusal: they may step in on the terms negotiated with a third party. That is not an obstacle, but it changes the sequence — the external party knows that its offer serves as a price anchor for others and approaches accordingly cautiously.
Valuation clauses
Some articles prescribe a valuation method for a departing shareholder — or even a fixed compensation formula — at times well below market value. This clause can determine the entire economic framework. It has to be read before anything else happens.
Who qualifies as a buyer
The co-shareholders
In most cases the most obvious and fastest route. They know the company, need no due diligence and have their own interest in not admitting a stranger to the circle. The drawback: without an alternative, they set the price. A credible external party fundamentally changes that negotiation.
The company itself
In Germany a GmbH may acquire its own shares under the conditions of § 33 GmbHG: the contribution must be fully paid in and the price paid out of free assets without touching the share capital. In Austria the acquisition of its own shares by a GmbH is prohibited in principle under § 81 GmbHG; there the route runs via the co-shareholders or — where the articles provide for it — via redemption of the share against compensation. Both are matters for the specialist advisers, but economically often the most elegant solution where liquidity is available in the company.
External investors
Private equity firms and family offices acquire minorities when a sale of the whole company is foreseeable, or when the running distribution carries the return. For them, the design of the shareholders’ agreement matters more than the price — set out in detail in the shareholders’ agreement when an investor comes on board.
When capital rather than an exit is the goal
Sometimes selling a shareholding is not driven by the wish to leave but by the need for capital. Then bringing in an investor is the more suitable route — described under finding an investor.
Frequently Asked Questions
- What is my minority shareholding worth?
- Usually less than its arithmetic share of the company value. Whoever sells without control can decide neither on distributions nor on a later sale — and every buyer prices that in. How large the discount is depends on the rights anchored in the articles of association and the shareholders’ agreement.
- Do I need the consent of my co-shareholders?
- In most cases, yes. The large majority of GmbH articles contain a Vinkulierung — a transfer restriction requiring the consent of the shareholders’ meeting — often combined with a right of first refusal or a tag-along obligation. The first step is therefore not the search for a buyer but a review of the articles of association.
- Who actually buys a minority shareholding?
- Three groups: the co-shareholders themselves, who want to increase their position; the company, through a buy-back of its own shares; and external investors who are either betting on a later sale of the whole company or looking for a running distribution. The circle is smaller than for the sale of an entire company, but it exists.
- What happens if the co-shareholders block the sale?
- Then the articles of association decide. Some contracts provide an exit right with a compensation mechanism, others leave the shareholder effectively locked in. Where no provision applies, what remains is negotiation — or, as a last resort, a court action for dissolution. That is a matter for your lawyer, not for an adviser alone.
- How long does the sale of a shareholding take?
- According to IGCP's assessment, selling a shareholding typically takes 3 to 12 months, preparation included (practical assessment, not a statistic, no guarantee). The exact duration depends mainly on whether a co-shareholder buys or an external buyer has to be found and the consent of the remaining shareholders organised.
- How are the proceeds taxed?
- For an individual holding at least 1 %, Germany applies Section 17 EStG with the partial-income method (Teileinkünfteverfahren): 60 % of the gain is taxable. If the shares are held by a holding company, capital gains are effectively 95 % tax-exempt under Section 8b KStG. In Austria the special tax rate of 27.5 % applies. The assessment of your individual case belongs to your tax adviser.
- What do tag-along and drag-along mean?
- A tag-along right allows the minority shareholder to sell their stake on the same terms when the majority sells, so they are not left behind with a new, unknown majority owner. A drag-along right conversely allows the majority to oblige the minority to sell along, so that a buyer can acquire one hundred percent. Both clauses usually sit in the shareholders’ agreement and influence the value of a minority considerably.
If you are thinking through the sale of your shareholding, we will talk with you confidentially and without obligation.