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Force co-director to buy shares...

Discussion in 'Legal' started by willhunting, Dec 28, 2014.

  1. willhunting

    willhunting UKBF Contributor Free Member

    Posts: 73 Likes: 1
    I want out of my business. We have no shareholders agreement in place. How do I go about selling my shares to my co-director? Can he refuse to buy them (given that a fair valuation has been made on them by a third party)? If so, then what course of action do I take?
     
    Posted: Dec 28, 2014 By: willhunting Member since: Aug 10, 2012
    #1
  2. The Resolver

    The Resolver UKBF Ace Full Member

    Posts: 2,865 Likes: 931
    Other than through a Petition to the court, you can't force him to buy your shares unless there is some provision in the Articles that, say, requires it should you resign from the Board and /or resign form employment by the company. But whilst often there may be some such provision on resignation it usually just gives the other(s) the option not a requirement to purchase. Such an option is also common should you have a third party who wants to buy. It is extremely unusual, however, to have a provision that forces the purchase.

    I mention the court. If he has conducted himself in such a way that actions have been taken through the company that prejudice unfairly your interest in the company then you may be able to persuade a court to order that be buys your shares at an independent valuation. However this is only in extreme cases and is very costly to pursue.

    The most common way to do this, which is the work I do for clients -see www.BoardroomResolve.com), is though persuasion to ensure he realises that it is against his financial interests to not buy your shares (e.g. he can't prevent you from resigning your employment and thus he ends up working alone to increase the value of your shareholding and having to share dividends with you even though you do not contribute in any way at all) and then negotiate a price and payment method. Does he/you also realise that he may be able to achieve full control without having to pay a penny whilst you still receive full financial value? I am referring to the possibility of the company paying you the value (if it has the funds) and your shares being then cancelled rather than transferred to him.

    In short there is no general one stop solution to this in the absence of a Shareholder Agreement which contains clear provision for share sale/cancellation when someone wants out (which is just one good reason why its is plain foolish to not enter into a Shareholders Agreement when running a business through a company). It is necessary to understand the current rules (the Articles) and know the full background of why you want to get out.

    You are welcome to have a 30 mn free of charge chat by phone with me anytime (07885 728801) and I can then not only only give you a general 'heads up' but send you a fee quote. I am also giving a talk on the 28th January - see in my sig below.
     
    Posted: Dec 29, 2014 By: The Resolver Member since: Mar 31, 2006
    #2
  3. Paul Norman

    Paul Norman UKBF Ace Free Member

    Posts: 2,085 Likes: 610
    As ever, Resolver's answer is thorough and on the money.

    The key thing, for me, is to realise this. You cannot force anyone to do anything. Even courts can be ignored, although that would bring consequences.

    This is a time for negotiation, unless he has done something that is clearly wrong.
     
    Posted: Dec 29, 2014 By: Paul Norman Member since: Apr 8, 2010
    #3
  4. LawSpark

    LawSpark UKBF Contributor Full Member

    Posts: 96 Likes: 5
    Would be interesting to know what terms you are on with your ex business partner now? Do you think he has the money available to buy your shares and does he want to carry on the business without you?
     
    Posted: Jan 1, 2015 By: LawSpark Member since: Oct 31, 2014
    #4