Shotgun Clause

AAA

DEFINITION of 'Shotgun Clause'

A buy-sell provision used by related parties in a business venture which gives an investor within the partnership the right to offer his/her portion to a partner at a specified price. If the partner does not buy the offered interest at this price, the partner must then sell his/her own interest to the offering party at the same specified price.

INVESTOPEDIA EXPLAINS 'Shotgun Clause'

The shotgun clause attempts to provide security to the partners of a venture by ensuring the offering of a fair price. Because the investor initially tendering the shares cannot be certain whether the shares will be purchased or rejected, the specified price must be carefully considered - after all, a rejection of the tendering creates an obligation for the offering party to buy the partner's portion at the same price he/she was originally willing to sell at.

RELATED TERMS
  1. Joint Venture - JV

    A business arrangement in which two or more parties agree to ...
  2. Limited Partnership - LP

    Two or more partners united to conduct a business jointly, and ...
  3. Tender

    To invite bids for a project, or to accept a formal offer such ...
  4. Tender Offer

    An offer to purchase some or all of shareholders' shares in a ...
  5. Buy

    1. A recommendation to purchase a specific security. A buy rating ...
  6. Partnership

    A business organization in which two or more individuals manage ...
RELATED FAQS
  1. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  2. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  3. What are the benefits for a company investing in a greenfield investment?

    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
  4. What is a family Limited Liability Company (LLC)?

    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
  5. What is the difference between a silent partner and a general partner?

    Business structures provide benefits to business owners and entrepreneurs. In the small business arena, the most common business ... Read Full Answer >>
  6. What are the liabilities of a silent partner?

    Because of the nature of their interest in a business, silent partners have limited liability that extends only up to the ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Entrepreneurship

    Should You Incorporate Your Business?

    Find out how becoming a corporation can protect and further your finances.
  3. Entrepreneurship

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  4. Entrepreneurship

    Netflix's New Strategy: Penetrate Your Hotel Room

    Will Netflix’s new venture—to offer its media content in hotels—pay dividends? Investopedia explores the business potential and related developments.
  5. Entrepreneurship

    Nike and the NBA, a Perfect Duo?

    What does Nike's recent eight-year contract partnership with the NBA entail for its largest competitor Under Armor?
  6. Stock Analysis

    Is PayPal Worth More Than eBay?

    Examine the online payment processor, PayPal, and discover its projected value increase as a standalone company, separate from eBay.
  7. Professionals

    Tops Tips to Prep Your Advisory Practice for Sale

    Here are three tips financial advisors should follow when prepping their practice for a sale to help with a smooth transaction and transition.
  8. Economics

    Who Are the Baby Boomers?

    Baby boomer is a descriptive term for a person who was born between the years 1946 and 1964.
  9. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  10. Entrepreneurship

    MLPs: Is Now the Right Time to Invest?

    Here's what you need to know about MLPs, those under-the-radar investment vehicles.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!