Buying 50% of a limited company

[timacheson]

I'm about to buy a 50% share of a limited company.

The company does nothing other than owning a very small piece of land. Buying into the company is my only way of having some control over the land.

There are four directors. I am buying 50% from two of them (brothers) and my wife and I will take over their directorships. I don't know any of them.

Being a total novice to the mechanics of companies I am worried about how I can ensure that, when the money is transferred, we have taken over as directors as well as owning the shares?

I'm worried about ending up with the share but not the directorships, because I can't see how the process guarantees everything coming together.

 

[Chris Ashdown]

First you need a solicitor to act for you to check over any shareholders agreement that may be in place

They will also draw up the sale and make sure it's written in a way that it's a legal to make sure you get the directorships

What do you plan to do with the land as with 50% you will not have control and I imagine the other directors have already made one person the managing director to basically run the company and he might even have a extra vote as chairman of the board

How has the company been valued was it by a accountant and does it have any trading history, is there any problem with the land like poisoned soil, green belt or any other restrictions on its use

It may seem expensive to get a solicitor but it may be the best desision you have ever made

 

[timacheson]

Thanks, Chris.

It sounds like taking over as director can be ensured in "the sale" and if so then my concerns are addressed. But I thought the only way to appoint directors was at a meeting, hence I'm worried it might not be easy to ensure this aspect of the sale.

I won't know the details of the company setup until the paperwork arrives in a few days. I'm happy with 50% I just want to ensure I have some input. I'm buying from the MD so perhaps I'll become MD but we'll see.

Solicitors have quoted me upwards of 2k. I'll struggle to raise that know top but may have to consider it if the paperwork leaves me with doubts.

 

[smo]

I can recommend an excellent solicitor who I used recently for a business transaction. He (they) tend to work on a fixed fee quoted up front for their work and it should be a lot less than 2K

I'd strongly recommend you get legal advice, if you want the details of my contact then drop me a PM.

 

[internetspaceships]

Thanks, Chris.

It sounds like taking over as director can be ensured in "the sale" and if so then my concerns are addressed. But I thought the only way to appoint directors was at a meeting, hence I'm worried it might not be easy to ensure this aspect of the sale.

I won't know the details of the company setup until the paperwork arrives in a few days. I'm happy with 50% I just want to ensure I have some input. I'm buying from the MD so perhaps I'll become MD but we'll see.

Solicitors have quoted me upwards of 2k. I'll struggle to raise that know top but may have to consider it if the paperwork leaves me with doubts.

Seriously, if you're going to do this without a solicitor and a shareholders' agreement then I recommend that you walk away right now. Alternatively you can listen to the good sense advice and do it through a solicitor AND get a shareholders' agreement.

 

[timacheson]

For me, the main concern at this stage is how to ensure that the directorship is a guaranteed part of the purchase. I don't see how that could be achieved, if it requires a vote, especially if the remaining two directors don't play ball.

I do still await a copy of the existing Shareholders Agreement etc, which should at least clarify the balance of power, but my question about how to guarantee the directorship aspect will still remain.

If I can find affordable legal advice, I'll take it. I can't be the first person ever to need to buy shares together with directorships. This must surely be a common scenario with some established methodology.

This is not a "real" company, just a container for managing the ownership of one small piece of land. The sums involved are not as high as you might expect, but significant to me under the circumstances.

 

[teddys]

For me, the main concern at this stage is how to ensure that the directorship is a guaranteed part of the purchase

One way to achieve this is to acquire at least 51% of the company. Or if you can't have more than 50% then make sure the Board balance is in your favour - e.g. 3/5 directors yours. In any case do make sure the shareholders' agreement is appropriately worded to protect your interests.

 

[timacheson]

The only offer available to me is to purchase 50% of the company from two of the four directors. A better deal would be great, but sadly it's pure fantasy in this case.

Therefore I need to work out if it's possible to guarantee that the two directorships will be transferred to me (and my partner) at the same time as the shares. This must be a common scenario, when buying into a ltd company, and I would be surprised if there was not some way to handle it reliably.

 

[jim_price]

You will need to have a Share Sale and Purchase Agreement which will include a number of conditions precedent, among which will be you and and the other shareholders entering into a Shareholders Agreement and you being appointed to the Board of Directors. Generally a completion meeting is held so that all relevant documents can be signed. You can't afford not to spend a reasonable sum on a solicitor to represent you in these matters.

 

[Chris Ashdown]

It's quite simple really the board sign a letter offering you the two directorships on condition you buy the 50% and you sign the directorship forms at the same time you purchase the shares at your solicitors

 

[teddys]

The only offer available to me is to purchase 50% of the company from two of the four directors. A better deal would be great, but sadly it's pure fantasy in this case.

Therefore I need to work out if it's possible to guarantee that the two directorships will be transferred to me (and my partner) at the same time as the shares. This must be a common scenario, when buying into a ltd company, and I would be surprised if there was not some way to handle it reliably.

A 50:50 stake together with equal Board representation can create problems. Therefore, to avoid litigation costs it is advisable that the agreement has provisions binding the parties to submit to mediation e.g. Centre for dispute resolution and mediation procedure.

Appointing the directors is fairly simple - convene a Board meeting where the other directors resign and pass a resolution accepting your consent to act as the director. Later one of you, the directors, could file the form with the Companies House.

 

[PrestonLad]

I guess that maybe this land means more to you than a simple business transaction, and that might be causing you to drop your guard here.

Please shop around and find a solicitor you can afford. And if you're being stretched financially, renegotiate the buying price. Once you've appointed a solicitor, it is not impossible that the solicitor might find some ammunition to help you renegotiate the price anyway... but the main thing is to make sure that you are getting all the rights you think you're getting, and get warranties to protect you (as far as possible) from liabilities/risks that the company could expose you to.

If you buy without a solicitor's advice, you might be lucky, but you might not. You clearly don't have the legal knowledge (as indeed I wouldn't) - but there can be so many things that could come and bite you...