can I get shares back from a shareholder!

[deanlynds]

My business partner and I started our company back in 1999,
We did not get a start up loan as a third party offered to loan the company money to set up, in return he would have 10 company shares (placed in his wife's name) and he become a Non Executive Chairman (Director). By the end of the first financial year we had paid back the total money borrowed to start up the company.

2 years ago he stepped down from the Board and gave up his title (Non Exec Chair) and has not worked in any form for the company since.

The last 3 years have been dificault for our company but we have survived!
We would now like some advise relating to the shares the third party holds as we want to know if we can ask (or other) for the 10 shares that the ex-Non Exec Chair still holds. We would now like them to come back to the 2 existing share holders. Is this possible!...

 

[Free Lance]

You can always ask for the shares back but the shareholder will almost certainly expect to be paid for them.

However, unless there is an agreement in place which says that his shares have to be transferred then there is nothing you can do to force him to sell his shares to you. Once they are issued to him they are his personal property and you cannot get them back.

There are other options. It's not clear what his 10 shares represent as a %age of the total but you may be able to, if legitimate, issue new shares to yourselves which has the effect of diluting his shareholding down. It should be for a legitimate reason and you will probably need to have a shareholders meeting to do so - in relation to which will have a right to attend and may be able to either (a) prevent the issue of new shares or (b) have a right to participate on the new issue by buying more shares at the same price you pay.

 

[deanlynds]

Thanks for the info,

Our understanding at the time was that we would inherit the 10 shares (10% of the company) back, although we do not think an actual date was set.

He was holding them in 'safe keeping' incase the 2 other Directors had a dispute.

We want to make sure we are doing the right thing.

 

[B2BDatasolutions]

I'm thinking "tough luck" is what springs to mind in this scenario. Freelance's advice is spot on.
Once you gave him the share's they became his property and if he feels he can make alot of money off the ownership of them you'll be extremely hard pushed to encourage him to sell them.

A 3rd "generally not so feasible solution" may be to dissolve the company and set it up under a new name with new shareholders. But unless we're talking a significant amount of money here it may not be worth it.

 

[Billmccallum]

My business partner and I started our company back in 1999,
We did not get a start up loan as a third party offered to loan the company money to set up, in return he would have 10 company shares (placed in his wife's name) and he become a Non Executive Chairman (Director). By the end of the first financial year we had paid back the total money borrowed to start up the company.

2 years ago he stepped down from the Board and gave up his title (Non Exec Chair) and has not worked in any form for the company since.

The last 3 years have been dificault for our company but we have survived!
We would now like some advise relating to the shares the third party holds as we want to know if we can ask (or other) for the 10 shares that the ex-Non Exec Chair still holds. We would now like them to come back to the 2 existing share holders. Is this possible!...

Why not just ask him how you can move forward now that he's left the company?

He may well be amiable and have a solution. If he's intent on keepng the shares, then you have to look to your original set up, if the Memorandum or Articles of Association don't have a cluase for dealing with shares, then he can choose to keep them unless you make him an offer that he thinks is acceptable.

 

[appyammer]

you dont have to pay a dividend or distribute the profits,but you were happy to take his money at the start

ask him what he wants for them (i think you may have already done this and dont like the answer) come to a compromise

 

[George Smiley]

freelance was spot on

 

[Bob]

What are the "current asset investments" on your accounts as these will impact upon the value of the shares. If they represent a realisable asset, then clearly, in the absence of a shareholder agreement, the 10% shareholder is unlikely to want to give up his shares without receiving a payment for them

 

[beasty]

Someone helps you get your business off the ground financially, his benefit is the shares
(not being paid back what he lent, he had that money anyway having it returned is hardly worth lending it for)

Why on earth should he give them up?

 

[johndon68]

I suspect that, given that this thread was 6 years old until George suddenly brought it back to life this afternoon that this was sorted out long ago...

John

 

[Bob]

I suspect that, given that this thread was 6 years old until George suddenly brought it back to life this afternoon that this was sorted out long ago...

John

Apparently not, as absolutely nothing has changed over the last 6 years

 

[johndon68]

Apparently not, as absolutely nothing has changed over the last 6 years

How, the person that brought the thread back to life today doesn't appear to be the OP...

John

 

[Bob]

Sorry @johndon68 Should have said. Checked the company filings at Companies House. No changes to shareholdings or directors. Nothing has changed since the OP first posted