Drafting Drag along Triggers in International Shareholders Agreements
Drafting cross-border drag-along triggers requires verifiable voting thresholds, explicit cash valuation floors, and deeded power-of-attorney execution clamp mechanics.
Untraceable Shareholders
Meaning
Equity holders who cannot be located by a company for the purpose of delivering notices and dividends. An untraceable shareholders status typically arises when investors move without updating their contact information in the register of members over a long period.
Search Obligation
The company must demonstrate that it has made reasonable efforts to find the missing owners before taking further action regarding their shares. These efforts often include checking previous addresses and searching public records to find a current point of contact.
Escheatment Risk
Unclaimed dividends and the shares themselves may eventually be transferred to the government under state laws governing abandoned property. This process happens after a specific number of years has passed without any contact from the shareholder or any activity on the account. Once the assets are handed over to the state, the owner must navigate a complex legal process to reclaim the investment.
This transition removes the administrative burden from the business but requires the owner to act through government channels rather than the company registry.
Dividend Retention
The company holds the unpaid funds in a separate account until the shareholder is found or the escheatment period expires. These funds do not earn interest for the shareholder and the company is required to keep an accurate record of the amounts owed.