Can I be forced to sell my shares?

[doodle13]

I am a minority shareholder (14%) in an very successful business. I set up the business 7 years ago with a total of 7 (yes 7!) other shareholders who put in collectively £100K. We were recently offered £8million for the business but the shareholder with decision making rights for others refused.

The business is a huge industry success story with rapid growth and ever increasing profitability vs turnover.

I have been actively involved leading and directing the company and strategy day to day as employed and paid CEO all that time.

Things are so bad now however, that I see no other option than to resign as CEO. All very personal, all born from jealousy and greed wont bore you with the details.

I offered my resignation to the Chairman, he refused it asking me instead to take a month to reconsider and he would tell everyone I was off sick...even sending me an email wishing me a speedy recovery..!

Basically the conflict has arisen as he and non-execs want to take the business to a different level, strangle the entrepreneurial spirit out of it and run it by committee, strip out it's core values and ramp up profit to get more dividend and try and sell for what I think is a quite unrealistic figure.

The Chairman has power of attorney over three other minority shareholders meaning he makes all the decisions on their behalf with no consultation required.

The Chairman has got negative support against me from other similar shareholders (10% each roughly) as one wants my job and the other wants to use our company to feed revenue into her others!

I am effectively being bullied into re signing a contract that removes all my decision making rights. All decisions now require Board approval.

It has got very personal and since my 'absence' all decisions I blocked because they were a gain personally for an individual shareholder but not for the good for the business - have been implemented.

So basically - I am happy to step down as CEO (I started this company from nothing and can do it again) but obviously want to get my package secured to ensure my family is not affected any more than they are suffering now...they will try and block me from setting up a competitor but I will not crash and burn from this experience.

My own burning question is "Can they force me to sell my shares???"

I have had conflicting legal advice and they currently are getting legal advice using company funds whereas any legal action I take will have to be funded personally...

 

[cjd]

My own burning question is "Can they force me to sell my shares???"

It depends what's written into any shareholder's agreement that you have - do you have one?

 

[Free Lance]

Without any express agreement as to what to do with your shares then they are your personal property. No one can force you to sell them without a prior agreement in place.

Agreements which might mean you have to sell could be found in an option agreement. More likely there may be clauses in your shareholders agreement (if any) or the articles of association.

The main one to look out for is a 'good leaver/bad leaver' clause which requires you to put your shares up for sale if you cease to be involved on a day to day basis with the company. The offer price is usually 'fair value' is you are a 'good leaver' or £1 if you are a 'bad leaver'.

The other clause that might catch you is a 'drag-along' clause which means that a majority can force you to sell your shares (on identical terms) if they all sell out to a third party.

If you are sitting on shares worth over £1m on your valuation then you really need to get decent advice. It is not the kind of advice you should be getting from a general practitioner/small high street firm. It sounds like you are not 100% confident with the advice you have received. It should be simple - either you have those clauses or you do not and that should be apparent within an hour of looking at your articles/shareholders agreement.

There are other ways the majority can put you on the back foot, such as issuing new shares to themselves or others to dilute your 14% down.

PM me if you would like a recommendation of a decent solicitor who specialises in this area.

 

[jbriggs]

I'm no lawyer, but in the past all of my shareholders agreements have contained "Drag-along" clauses + other clause that force sale in certain situations.
I can only speak for myself, but in one shareholder agreement we had a 30% drag along, ie if 70% of shareholders agreed to sell the company the other 30% had no choice.

Secondly, I once signed a an agreement stating that if I resigned from the company within a given period I must sell my shares at market rate offering them first to the existing shareholders.

Try to find, then have a good read of your shareholders agreement. It sounds like a few pound spent on some corporate legal advice would be a good idea. - But I'd say use a corporate specialist rather than a general lawyer.

Best of luck. I really feel for your situation, but stay positive, you have done it once, so you can build it again. The next time will be bigger and better.

Johnathan

 

[jim_price]

Agree with the other respondents, at a 14% holding you cannot be forced to sell your shares unless there are contractual provisions in place. It might be a bit galling to have to pay for legal advice, but we seem to be talking about a shareholding worth, possibly over £1m. My advice would be to talk either to a city firm or large provincial firm and ask there corporate lawyers for a body of work that demonstrates that they can get results from these situations. Perhaps if you state your location people may make recommendations?