Inalienability clause

An inalienability clause is a contractual or statutory restriction preventing the transfer or sale of shares without the prior consent of specified parties, or during a defined lock-up period. It is used in shareholders' agreements to stabilise the shareholding base — particularly in fundraising structures — by preventing reference shareholders from selling during a lock-up period (typically 12–36 months). In valuation, an inalienability clause justifies an additional illiquidity discount on the affected shares for the duration of the restriction.

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Example: in a Series B fundraising round, founders accept a 24-month inalienability clause on their entire shareholding. This restriction temporarily reduces the liquidity of their shares and justifies a 10–15% discount relative to the theoretical valuation in any partial disposal during the restricted period — a discount documented in the shareholders' agreement and applied in any interim valuation or secondary transaction.

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Hectelion incorporates inalienability clauses into valuation analyses and advises on their calibration in shareholders' agreements for fundraising transactions.