Put and call rights in a shareholders' agreement give founders and investors a pre-agreed mechanism for buying or selling shares when a leaver event, a covenant breach, or a fixed maturity date hits — the goal is to fix the buyer, the price and the timeline before anyone has leverage to renegotiate. Founders face a different risk profile than investors here: they're usually on the receiving end of the call option, so the price mechanism decides whether an exit is fair or punitive.
- Put and call rights in a shareholders' agreement fix the buyer, price and trigger before any dispute starts.
- A call option lets investors buy out a leaving founder; a put option lets investors force an exit at maturity.
- Fixed-price and floor-and-cap mechanisms protect founders more than open-ended 'fair market value' clauses.
- Lina drafts and reviews put/call clauses with senior lawyer sign-off, fixed fee, delivery in about 36 hours in 2026.
Why put and call rights matter for founders
A shareholders' agreement without a clear put and call mechanism turns every exit into a negotiation from scratch — exactly when a founder has the least leverage, right after a resignation or a dismissal for cause. The clause decides, in advance, who can force a transfer, at what price, and within what window, so nobody is negotiating valuation while emotions and lawyers are both running high.
Founders negotiating their first shareholders' agreement with an investor need the price mechanism to be specific enough that it can't be argued over later. Investors want the same certainty in reverse: a guaranteed exit path if the company stalls or a founder breaches a core commitment. Put and call rights solve both problems in one clause, but only if the mechanism is drafted before the round closes, not patched in after a dispute starts.
Identify every trigger event that activates the option
A put or call right is only as good as the list of events that switch it on. Vague triggers ('material breach', undefined 'good cause') are the single biggest source of later disputes.
- Founder leaver: resignation, dismissal for cause, incapacity, death
- Change of control at the investor level
- Breach of a material covenant — non-compete, IP assignment, confidentiality
- Fixed maturity date (commonly 5 to 7 years from closing)
- Deadlock on a major governance decision
Fix the price mechanism before you sign
The price mechanism is the clause founders should read three times before signing anything. Four structures cover almost every deal:
- Fixed price stated directly in the shareholders' agreement
- Formula tied to the last valuation round or an EBITDA multiple
- Independent expert valuation, naming the expert or the appointment method up front
- Floor-and-cap bands that bound the worst and best outcome
Fix the mechanism before the trigger event, not after — once a founder has resigned or an investor has decided to exercise the put, neither side has an incentive to agree on a fair number.
“If the call price isn't fixed before the trigger event, the negotiation happens exactly when leverage is weakest.”
Draft the call option to cover founder leaver scenarios
The call option is the clause that lets the company or investors buy back a departing founder's shares. It needs more precision than a single sentence.
- Good leaver vs bad leaver price differential (full value vs discounted or nominal price)
- Cross-reference to the vesting schedule so the clause only reaches unvested shares, or explicitly states otherwise
- Exercise window, commonly 30 to 90 days from the trigger date
- Payment terms: lump sum, installments, or tied to a future financing round
Founders drafting this without counsel usually default to 'fair market value' with no method attached — a gap that surfaces exactly when someone tries to leave. A senior lawyer at Lina fixes the mechanism against the actual cap table and vesting schedule before the shareholders' agreement is signed, with the same lawyer signing off on the final draft.
Draft the put option to cover investor exit scenarios
The put option runs the other way: it lets an investor force a buyback if the company hasn't delivered a liquidity event.
- Maturity-triggered put, typically exercisable after 5 to 7 years with no exit
- Breach-triggered put tied to a founder's default on a covenant
- Price mechanism cross-referenced to the same formula used for the call
- Company's funding source for the buyback — redemption of shares vs a founder's personal purchase obligation
Set the exercise window and notice period
A put or call right with no deadline can be exercised at any time, which defeats the purpose of fixing certainty.
- Written notice requirement, specifying the delivery method (registered letter, dated notice)
- Fixed exercise window, commonly 30 to 60 days from notice
- Consequences of missing the window — does the option lapse or extend automatically
- Coordination with any pre-emption or first-refusal clauses already sitting in the shareholders' agreement
Align put/call rights with drag-along and tag-along clauses
A put or call option that ignores drag-along and tag-along rights creates a conflict the moment two mechanisms could fire at once — for example, a founder leaver event during an active sale process.
- Confirm the put/call doesn't override a drag-along already in motion
- Sequence which mechanism takes priority if both could trigger simultaneously
- Cross-reference share transfer restrictions and board approval requirements
- Check that the price mechanism used for the put/call matches (or is expressly different from) the sale price mechanism
Get the mechanism reviewed before the round closes
A put and call clause drafted in isolation, without checking it against the cap table, the vesting schedule and French Article 1592 requirements for third-party pricing, is the version most likely to fail when it's actually invoked.
- Senior lawyer review of the price formula against the current cap table
- Confirmation the clause complies with Article 1592 of the French Civil Code if a third-party expert sets the price
- Check that the clause survives a later SAS-to-holding restructuring
- Fixed-fee scoping, with a lawyer response within 30 minutes and a quote within one hour
Price mechanisms compared
| Option | Best for | Key limitation |
|---|---|---|
| Fixed price | Founders who want certainty locked in at signing | Doesn't adjust for company growth or decline over time |
| Formula-based (revenue or EBITDA multiple) | Later-stage rounds with established financials | Needs audited numbers; disputes over which multiple applies |
| Independent expert valuation | Deadlock situations with no agreed formula | Slower, adds a third-party cost, still contestable in court |
| Floor-and-cap hybrid | Founders and investors who both want bounded risk | More clauses to draft and negotiate before signing |
Verdict: a fixed price or floor-and-cap mechanism gives founders the most protection; open-ended fair market value clauses favor whichever side has more negotiating power at the moment of exit.
Common mistakes founders make with put and call rights
- Signing a call option that says only 'fair market value' with no formula, appointment method, or timeline attached
- Leaving trigger events undefined — 'material breach' or 'good cause' with no examples invites a dispute later
- Skipping the notice period and exercise window, so the option can technically be triggered at any time
- Forgetting to cross-reference the vesting schedule, which lets a call option reach shares that already vested
- Waiting until a leaver dispute is already underway to get the clause reviewed, instead of scoping it before the shareholders' agreement is signed
Get your put/call clause reviewed
Fixed-fee scoping, lawyer response within 30 minutes, typical delivery in about 36 hours.
FAQ
What's the difference between a put option and a call option in a shareholders' agreement?
A call option lets one party (usually the company or investors) force a shareholder to sell, most often a departing founder. A put option runs the other way: it lets a shareholder, usually an investor, force the company or other shareholders to buy their shares, typically at a maturity date with no exit.
Is a put and call clause mandatory in a French shareholders' agreement?
No, it isn't a legal requirement, but investors in France routinely require one before closing a round. Without it, a founder leaver event or a stalled exit has no pre-agreed price or process.
How is the price set in a put or call option?
Price is set by one of four mechanisms: a fixed price stated in the agreement, a formula tied to the last valuation or an EBITDA multiple, an independent expert valuation, or a floor-and-cap band. The clause should name the exact method, not leave it to 'fair market value' with no process.
What happens if a founder leaves before their shares are fully vested?
Unvested shares typically return to the company or the cap table under the vesting clause, separately from the put/call mechanism. The shareholders' agreement should cross-reference both clauses so the call option only applies to vested, owned shares.
Can investors force a buyback with a put option if there's no exit after five years?
Yes, if the shareholders' agreement includes a maturity-triggered put, commonly exercisable after 5 to 7 years with no liquidity event. The company's obligation to fund that buyback needs to be specified in the same clause.
How long is a typical exercise window for a call option?
Most call options set a window of 30 to 90 days from the trigger event, with written notice required through a specified delivery method. Missing the window usually lapses the option unless the agreement states otherwise.
Do put and call rights apply to a SAS or only to an SA?
Put and call rights are used in both SAS and SA structures in France; the mechanism sits in the shareholders' agreement rather than the company's bylaws. Article 1592 of the French Civil Code governs price-setting by a third party regardless of corporate form.
How much does it cost to draft put and call clauses in a shareholders' agreement?
Cost depends on the scope: how many trigger events, which price mechanism, and how it interacts with existing drag-along and vesting clauses. Lina scopes the work and returns a fixed-fee quote within one hour of a lawyer response.
One last thing
Article 1592 of the French Civil Code allows a price to be set by a third party, but if the shareholders' agreement doesn't name the expert or the appointment method up front, a court can strike the price-setting clause entirely — leaving the put or call right without an enforceable price at all. Founders who treat the price mechanism as a formality rather than the core of the clause are the ones who end up back in negotiation exactly when the trigger fires, in 2026 or any other year.
