Stuck with 50% shares and a non-compete clause

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S

smithers

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Jun 20, 2010
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  • #1
    [originally posted to another thread, here. But separated to it's own thread to get the OP more help/advice - DuaneJackson]

    I own 50% of the shares in a company (Im guessing its a private company - though I never realised there was a difference). I am one director - there are 2 more (a couple) one with 15% and the other 35% of the shares.
    I want out - and they have offered to buy me out but with a condition I dont do any similar work for 2 years (they want to keep me on as an employee for 3 months to build a new website). I was only talking about selling my shares - not my right to work.
    I understand that condition (which first appeared in a contract I saw yesterday and hadnt been mentioned in any discussions) but the £ offer they have made me is only what I would have made in dividends this year anyway - the advantage to me in selling now was that I could get out in a couple of months and never have to have anything to do with the other directors again and could do what I wanted. With the econonmic situation being what it is it would seem foolhardy for me to agree to their condition without a substantial amount in return for that condition on top of the share price (I think the equivalent of 80% of 2 years dividends might be fair).

    The business is profitable and has very low costs (the real cost is me, my time and effort but I dont take a salary just a dividend). It could do a lot better but not with all 3 of us trying to run it our own way.

    What I find most worrying is that if I just wanted to walk away now, resign as a director and relinquish my shares I cant? I seem to be trapped into working for a business that I no longer want to be a part of, keeping shares i dont want (I cant even give them away?) and with people I dont really want anything to do with. (At present it - a website- needs me to keep going).
     
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    smithers

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    Jun 20, 2010
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  • #3
    Mainly because having searched aorund I couldnt find anywhere that told me how I can get rid of shares if no-one else will buy them or take them off of me - so assumed I have to keep them and that this then makes me responsible for ensuring the company's customers get the service they have paid for (which in all conscience I'd have to do and do do). I literally dont know what the process, sorry that probably sounds too stupid to be believed.
     
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    DuaneJackson

    DuaneJackson

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    Jul 14, 2005
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    Brighton / London
  • #4
    smithers said:
    sorry that probably sounds too stupid to be believed.
    Click to expand...

    Not at all, none of us are born with knowing this stuff!

    You said you can't just walk away and relinquish your shares. By relinquish I assumed you meant just give them up for no financial return. There's no reason you can't do that.

    If I were you, I'd take the money you've been offered (equiv. of dividends you'd have got anyway) and walk off into the sunset.


    The "non-compete" clause in your contract is a bit of a buggar, otherwise I'd be suggesting you go set up on your own. But whether you were aware of the clause or not, it sounds like you agreed to it.

    There are plenty of free legal advice places where you should be able to get advice as to whether or not the non-compete is enforceable.

    I'm going to separate your posts and mine out into a separate thread so hopefully you may get more input from others.
     
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    lww

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    Jan 20, 2010
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    Surrey
  • #5
    Don't confuse your ownership of shares with your duties as a Director - you can hold shares without being a Director, so for example there is no reason why you can't resign as a Director (assuming there is at least one other) but keep your shares.

    Any existing clause about non-competing is negotiable - if they want to buy you out but want you to do 3 months more work and not compete, well that is not necessarily reasonable (and what is "reasonable" is up to you to define!). So you might for example wish to counter-offer that you accept the cash figure being touted, however you will only do the additional work for a fixed price paid in installments and that you are free to start a competing business at the end of this time.

    If I was you, I would start by thinking about what you want - don't focus on their offer so much as work out what it is you want to do to change your current situation. It sounds to me like you are the lynchpin in the company, and whilst they might want to take it in their own direction now if you leave or stop working there will be no company left - so you are in a decent position to get this to play out in your favour.
     
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    B

    Billmccallum

  • #6
    What do you want? Thats the big question... do you want to be paid for the shares or do you want out?

    I'm guessing from the tone of your post that you are not having a good time working with the couple who are also directors/shareholders.

    If you leave the business now, how will that impact the business and its income?

    I your leaving will have a major impact then you simply have to resign as a director, without signing a non-compete clause agreement and do your own thing.

    If the business fails after you leave then the shares would be worthless anyway, but if they continue to make a profit then you get dividends.

    What you need to do is decide what you want in the very near future and then discuss it with your fellow shareholders. If your leaving will have a major impact then they will be more likely to respond to what you want.

    At the end of the process, don't sign the non-compete clause, you still need to make a living.
     
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    JElder

    JElder

    Free Member
    Jul 2, 2008
    1,142
    192
    Southampton, Hampshire
  • #7
    As per the earlier poster:

    I could own 100 shares in BP - but I have no say in how it is managed, and no responsibility for it.

    50% shares gives you a lot of power, but does not have to. You can resign as a director, resign as an employee (if you are one), and that's it.

    They have to keep paying you dividends, unless they buy the shares or close the company.

    whether you can compete depends on your CURRENT contract, not any new one they may want to compose. You have duties as a director not to cause direct harm, so stealing customers would be a bad idea, but just working in the same industry should be ok, unless your current contract says otherwise.

    PS If someone wanted me to not work in an industry for 2 years, I would expect a payment equal to 2 years salary, PLUS the value of the shares. The value of the shares, of course, is very open to negotiation.
     
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