Can directors sell without shareholders permission?

[INS1303]

Hi. I am a 33.3% shareholder in a business with the other 66.6% being split by two other shareholders. (we all put in equal capital to start the business) These other share holders are related. We were all directors. Three years ago due to difference of opinions, the stress in my position and failing personal relationships with the other directors I felt I had no other option but to resign as day to day manager of the business and director for the sake of my physical and mental health.

I left the business taking employment with another business of the same type. I stayed as a shareholder only as my money was still in the business. The other partners did not take the changes well, giving me only 1 shareholder meeting a year where year old information from the previous financial year was presented. They have been incredibly difficult to deal with and relationships have got quite bad. They have not been involved in the day to day running and the business has been going down hill. I have suspicions that they have been trying to take any profit made by the business as "payment" for their efforts to keep it going. The accounting information that I have been allowed to see is so confusing, nothing seems to add up, losses are shown month on month but if that is true I know they do not have the resources to continue those losses so I don't really trust the figures presented to me I recently found out that they have put the business up for sale without telling me. (It is listed on at least three websites)

My question is - should I worry? Of course the situation is serious and I think that the business is in serious financial problems but can they complete the sale? They have not spoken to me at all but at some point surely any legal paperwork would need my signature.
Could I actually be in a strong position as, without my signature, no sale could complete - HELP!!

Thank you in advance, all suggestions gratefully received

 

[jim_price]

If they want to sell the share capital of the company then you're correct, you would need to be party to the agreement (that's unless they've trying to see the 66.6% interest only). One risk for you to consider is that they sell the trade and assets of the company, and use the cash raised to pay creditors including, perhaps, themselves. There's the possibility that such a course of action would be an unfair prejudice against you but you would need legal help to pursue that I expect.

Why not try to open up a dialogue with them and establish precisely what is going on.

 

[The Resolver]

The other partners did not take the changes well, giving me only 1 shareholder meeting a year where year old information from the previous financial year was presented.

You don't have to wait for them to call a shareholders meeting. You have the right to demand other meetings to raise issues of concern to you as part owner of the company. Generally you should become familiar with your rights as shareholder (and the 'downsides' for themselves) and make them realise you are so aware.

Do they realise that they cannot now declare dividends (to lower the tax/NI burden) without giving you one third of all such dividends (unless your shares are in a different class of shares). Do they realise that they cannot effectively sell the company without your agreement (as nobody will buy only two thirds (subject to any Shareholders Agreement giving them a right to force you to sell to a buyer)).. Do they know that they are at risk of being forced to be ordered by a court to buy your shares should they act in a way that is unfairly prejudicial to your interests eg allocating all profit to salaries to themselves. Do they know that they cannot pass a Special Resolution (eg to change Articles, change name, go into liquidation) without your agreement? Do they realise that as they work hard to build up the business they are adding value to your shares

I can help you become knowledgeable on these issues and help persuade them that it is not sensible for them to not negotiate now to buy you out. Call me for an initial chat on how I can help.- 07885 728801

 

[INS1303]

Thanks for the advice. I will try to work out a way to approach them. I would love to be able to come to some sort of arrangement but I think that they cannot get past the fact I work for a competitor now. Despite my employer not being interested in my former business and that it does not serve any interest for me to hurt my former business I think that they have so much mistrust that they are totally unable to communicate honestly but one thing I have learnt is that when anything goes down the legal route the only winners are the solicitors!

 

[The Resolver]

I think that they have so much mistrust that they are totally unable to communicate honestly but one thing I have learnt is that when anything goes down the legal route the only winners are the solicitors!

Which is why what I am suggesting is the opposite of 'the legal route'. I retired from practice as a solicitor precisely to focus on developing my expertise in resolving disputes rather than acting in adversarial conflict. I also find in these situations that where trust has been lost , a more positive negotiation does take place when an independent, and if acting as mediator, neutral, third party becomes the conduit for negotiation.