What are put rights and call rights?

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Put rights and call rights are terms used in the context of ownership of equity in a company. They refer to contractual rights granted to shareholders or investors to either sell (put) or buy (call) shares of the company at a specified price or within a specified period.

Put rights, also known as “sell” rights, give shareholders the option to sell their shares back to the company or to other shareholders at a predetermined price. This can be useful for shareholders who want to exit their investment, and for the company, it can be a way to ensure that shares remain within the company or with certain investors.

Call rights, also known as “buy” rights, give shareholders or the company the option to buy additional shares at a predetermined price. This can be useful for companies that want to raise additional capital, or for shareholders who want to increase their ownership stake in the company.

Put and call rights can be structured in different ways, and the terms and conditions can vary depending on the specific situation and the goals of the parties involved. They are often included in shareholder agreements, operating agreements, or other legal documents that govern the ownership and operation of the company. It’s important for all parties to carefully consider the terms of these agreements and to seek legal advice if necessary to ensure that their rights and interests are protected.

Will Blackton is a business lawyer based in Raleigh, North Carolina. You can reach Will at wblackton@bobllaw.com or (919) 636-5979.

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