This clause prevents someone from selling their shares or stake in a company for a set period of time, usually after a major event like an IPO (going public) or acquisition. The idea is to show confidence in the deal and prevent a flood of shares hitting the market all at once, which would crash the stock price. It's a standard protection in investment and M&A (merger and acquisition) deals. Typically these last 180 days to 2 years depending on the deal size.
If you're being locked up, negotiate for the shortest period possible—180 days is standard, so don't accept longer without good reason. Also ask for "acceleration clauses" that let you sell early if certain positive events happen (like the company hitting profit targets), and make sure the lock-up doesn't apply if the company is acquired by someone else. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause prevents someone from selling their shares or stake in a company for a set period of time, usually after a major event like an IPO (going public) or acquisition.
Why should I care about this clause?
The idea is to show confidence in the deal and prevent a flood of shares hitting the market all at once, which would crash the stock price.
What are my options?
It's a standard protection in investment and M&A (merger and acquisition) deals.
How does this affect small businesses?
Typically these last 180 days to 2 years depending on the deal size.