Rights Issue Question

[chassa]

Hi all noob here.

I recently resigned as a director of a private limited company but retain roughly one third of the shares. There was and is no shareholder agreement and, when I left, my partners thought I should 'donate' my shares to them and walk away. Obviously I disagreed and this has been a source of friction.

To cut a long story short, I met with them today and was presented with the option of selling at a derisory price or they would do a rights issue. Do they have me over a barrell? I know that the company isn't doing well and I want to be reasonable but I think it might be a feint to get my shares cheap. I know I could refuse the 'rights' but does that mean i end up with a dilluted holding? There are probably no external buyers for the shares.

Thanks

[Kent Accountant]

Hi all noob here.

I recently resigned as a director of a private limited company but retain roughly one third of the shares. There was and is no shareholder agreement and, when I left, my partners thought I should 'donate' my shares to them and walk away. Obviously I disagreed and this has been a source of friction.

To cut a long story short, I met with them today and was presented with the option of selling at a derisory price or they would do a rights issue. Do they have me over a barrell? I know that the company isn't doing well and I want to be reasonable but I think it might be a feint to get my shares cheap. I know I could refuse the 'rights' but does that mean i end up with a dilluted holding? There are probably no external buyers for the shares.

Thanks

This thread (http://www.ukbusinessforums.co.uk/forums/showthread.php?t=56079) is not dissimilar

[chassa]

Thanks KA - will read

[i.m.]

Haven't read the other thread, but it will depend on the Articles of Association of the company - pre-emption rights usually stop the possibility of this sort of thing. The suggestion also amounts to conduct that is unfairly prejudicial to your position as a shareholder and you can go after them for that. There is quite a bit you can do, actually, and the first thing you should so is to demonstrate to them that you know there is quite a bit you can do! Get in touch if you want a bit of advice.

Cheers

BR