A horse is a valuable asset. That is why there is often shared ownership. Shared ownership works well as long as the owners are on the same page and remain in agreement with each other, but conflicts lurk.

Shared ownership

When there are multiple owners of a horse, one legally speaks of multiple shares in the horse. Shareholders, if they are wise, will enter into a shareholders’ agreement. This shareholders’ agreement regulates the relationships between the parties, not only as long as ownership continues and the parties can get along with each other, but also if the owners have a difference of opinion for whatever reason.

An example

Two friends decide to buy a promising young show jumping horse together. They expect that their super talent could be a great investment. The horse’s training goes much better than both friends could ever have imagined and the horse reaches the national top in no time. Unfortunately, just at that moment one of the friends runs into financial problems due to private circumstances. As luck would have it, he is approached by someone who is willing to pay an astronomical amount for 100% ownership of the talented show jumping horse. The friend with the financial problems is of course interested in this and wants to sell the horse as soon as possible. The other friend, who is not in financial trouble, does not want to sell the horse now, but only after some time, in the hope that the proceeds will then be even higher. A conflict arises. That conflict is soon no longer even about the sale, but also about the management of the horse. How should this conflict now be resolved? Our friends never made arrangements for this. They have never even thought in advance about all the conflict issues that now divide them.

The shareholders agreement

A shareholders’ agreement can provide a solution here. In such an agreement, the shareholders arrange their mutual rights and obligations in advance. Those agreements are binding. By drawing up a shareholders’ agreement, parties are forced to think about important matters in advance and this can prevent conflicts.

Costs and revenues

The shareholders in the horse must agree who will bear which costs for which share. This includes costs for stabling, care, farrier, training, veterinary care, transport, harness. Of course, there may be many more costs. In addition to the costs, the benefits should also be considered. In addition, agreements must be made about who can make decisions regarding costs to be incurred and revenues to be generated and how those decisions should be made. This will be easier with a children’s pony that you share with friends than with a show jumping stallion with 15 owners who competes at top international level, but the conflicts are almost as annoying.

It is not inconceivable that a shareholder in a horse may wish to exit for whatever reason, prematurely or otherwise. How do parties deal with this? A distinction can be made between a ‘good leaver’ and a ‘bad leaver’. The shareholders’ agreement will then have to define what a good leaver is and what a bad leaver is and under what circumstances and under what conditions a good leaver or a bad leaver can or must resign.

Sell shares in the horse

When the time comes for a shareholder to resign and transfer his shares to one or more other shareholder(s), it is useful if agreements have been made in advance about the price of those shares. Furthermore, agreements must be made about how a shareholder should behave after he has sold his shares to the other shareholder(s) or to a third party. Agreements about what happens when one of the shareholders wants to sell his/her share in the horse to a third party must also be arranged in a shareholders’ agreement. Do the other shareholders have the obligation to co-sell or are they allowed to co-sell to that third party? Shareholders can also agree that the shares in the horse may not be sold during a certain period. What is usually not thought about in advance are agreements about the settlement of the collaboration if the shareholding ends out of necessity, for example and not unimportantly due to the death of the horse.

Avoid conflicts

A man a man, a word a word, unfortunately no longer applies in the equestrian world. And yet the majority of the sport horses known to us have two or more owners without agreements being made about management, decision-making, costs and returns, retirement, co-selling, valuation, confidentiality, relationship and non-competition clauses and dead-lock situations in which there is a tie of votes. Many conflicts can be prevented with a solid shareholders’ agreement.