Business sale

[James uren]

Hello everyone.
Ive seen various post on this but none that completely apply to myself.
I am a 50/50 shareholder & director of an engineering company thats been running for 6 years now. I want to exit the company so have done the required solicitor things and previously got a price evaluated for my shares. My co-director is being extremely difficult. She originally agreed the share buy out verbally but is now not signing any of the solicitor paperwork. I want to move on, but feel she is deliberately being awkward and dragging the process along to prevent my exit. This has been going on for over 2 months now. For your information, We were not ever a couple, only business partners. Is there anything i can do? I want to be able to move on, get a job or whatever. I feel caged in with no way out. She just shuts me down when i mention about signing the solicitor forms and share transfer forms. We have standard articles of association and no shareholders agreement… hindsight is a horrible thing i know.

thanks, j

 

[NickZ]

Does she want to keep the company, or didn't you offer your shares to her?
Selling the entire company to a competitor might be easier.

 

[pentel]

previously got a price evaluated for my shares

She originally agreed the share buy out verbally but is now not signing any of the solicitor paperwork.

Has she said why she wont proceed?

Perhaps she thinks the valuation is too high, a business is probably one of most flexibly priced things to buy or sell.

 

[Mark T Jones]

Communication is the key here!

Ask here what her concerns are? Does she have an alternative proposal to make things work (it may of course be that they simply don't have the money to buy your shares)

You can't make someone buy something from you. There are certain levers you can pull - Ultimately the PITA lever, but they will damage your relationship and Ultimately the business.

@The Resolver will have some suggestions

 

[UK Contractor Accountant]

Perhaps she thinks the valuation is too high

or not an independent valuation!

Did you both agree on a valuer for the business?

 

[James uren]

Has she said why she wont proceed?

Perhaps she thinks the valuation is too high, a business is probably one of most flexibly priced things to buy or sell.

 

[James uren]

Thank you for your replies.

The valuation was done by our accountant and my business partner also spoke to them about it and the figure was deemed fair. I even dropped it a few thousand to be more appealing.

Does she want to keep the company, or didn't you offer your shares to her?
Selling the entire company to a competitor might be easier.

She wishes to keep the company and she knows i want to sell my shares to her

 

[James uren]

or not an independent valuation!

Did you both agree on a valuer for the business?

We used our accounant. We both agreed on the price verbally, but today i heard that she will need to take a loan from the business to buy me out, and i can already see that this is going to cause an issue as she will feel she has to pay it back. The company can afford the buyout

 

[pentel]

Have you asked your accountant about the possibility of the company buying your shares from you via a share buy back? This can have tax advantages (for now) via business asset disposal relief.

 

[James uren]

or not an independent valuation!

Did you both agree on a valuer for the business?

Yes we did. The amount was put forward from our accountants. The company can afford it, but i heard today that she will need to loan from the business to buy my shares, and i can see that she is going to look at that as an ongoing debt and/or that its going to cost her long term more than the share price.

 

[James uren]

Have you asked your accountant about the possibility of the company buying your shares from you via a share buy back? This can have tax advantages (for now) via business asset disposal relief.

My solicitor has written all that up but not yet sent it to her. He said she will have to loan from the business to buy my shares but she will just see that its costing her more long term than the share buy cost. For example if the cost of my shares is 50k, and leaving 80k left in the business then she needs to loan 50k from the company. She will see this loan as a debt and that it will cost her much more than the original 50k

 

[LeeHayler]

Following… im in exactly the same position

 

[UK Contractor Accountant]

Have u looked at the possibility of a staggered sale?

 

[The Resolver]

There seems to be some misunderstanidng. If the company can afford the buyback out of distributable profits then there is no need for her to take out a loan, for her to become the 100%R# owner of the company. She is not the buyer but once the buyback is completed those shares cease to exist. so her shares become the 100% shareholdingn the company,,

I suspect there is am issue in respect of monies previously withdrawn from the company as interim dividend that cannot now be authorised by a Resolution to issue a final dividend because the buyback would not leave enough remaining distributable profits to be covered . If you cannot authorise interim dividends previously taken then the monies taken are a loan and would have to be paid back.

You really need to press the accountant’s and lawyers for clarification.

 

[James uren]

There seems to be some misunderstanidng. If the company can afford the buyback out of distributable profits then there is no need for her to take out a loan, for her to become the 100%R# owner of the company. She is not the buyer but once the buyback is completed those shares cease to exist. so her shares become the 100% shareholdingn the company,,

I suspect there is am issue in respect of monies previously withdrawn from the company as interim dividend that cannot now be authorised by a Resolution to issue a final dividend because the buyback would not leave enough remaining distributable profits to be covered . If you cannot authorise interim dividends previously taken then the monies taken are a loan and would have to be paid back.

You really need to press the accountant’s and lawyers for clarification.

Thanks for your input. We absolutely do have the funds. Our accountant has confirmed this. Strange that my solicitor has not brought up the fact my business partner does not need to loan from the company as it can afford to buy the shares. I completely get what you are saying and thats exactly how i thought it worked. The business is very solvent with a turnover of around half a million with net profits hovering around the 30% mark. I think that maybe my initial conversation about my business partner with my solicitor is the issue when i said she wants to buy the shares.. the company has actually turned over nearly another 70k since the shares were valued.

 

[UK Contractor Accountant]

its not necessarily funds that is the issue - its whether it has sufficient distributable P&L reserves

 

[pentel]

Strange that my solicitor has not brought up the fact my business partner does not need to loan from the company as it can afford to buy the shares.

Some solicitors will only do as instructed.

 

[MikeJ]

It sounds as they she's not happy with the deal. Perhaps she feels it's bad value for money, that you're too valuable to lose from the company, or that she's concerned about what you're going to do. Ultimately, you can't force her to buy you out.

You can leave the company though. No reason for you to work there. Stay as a director if you want. Either way, the shares are yours...

 

[Mattymoomoo]

I think you need to sit down with her and find out what the real issue is and work through it. Ultimately its in both of your interests to work this out amicably. There is a stick though, for both. Remind her that you do have other options which she wont appreciate such as sell your shares to a local criminal. You could retain half the business and do no work.....Maybe tone down my comments above to see if you can find out if she is just trying to negotiate a much better price.

 

[Duke Fame]

My solicitor has written all that up but not yet sent it to her. He said she will have to loan from the business to buy my shares but she will just see that its costing her more long term than the share buy cost. For example if the cost of my shares is 50k, and leaving 80k left in the business then she needs to loan 50k from the company. She will see this loan as a debt and that it will cost her much more than the original 50k

As mentioned elsewhere, the company can buy the shares back from you, your business partner becomes the 100% shareholder. As long as the company can afford the shares, your business partner will not need to pay / borrow anything. I.e if there are 100 shares issues as 50:50, the company buys back 50, then there are only 50 shares issued and she holds all of them (100%)

Regardless of who buys your shares, you will have a capital gain on the shares but that shouldn’t be an issue for her. Also, depending on the value, there may be stamp duty to pay, this will be paid buy the buyer (the company) – the figures you hint at make this unlikely.

If I were her, I’d be asking for a few restrictive covenants