Minority shareholder forced to sign a shareholders agreement

[BjornB]

Hello,

I am a minority shareholder (5%) in a rapidly growing company which turns ~£2.5m / year and it is projected it will be turning £4-£5 mil annually by the end of next year. There are 2 other minority shareholders (5% each) and the majority shareholder (85%). We do not have a shareholders agreement. All shares are ordinary.

Quite recently the majority shareholder asked everyone to sign a shareholders agreement. Due to a number of ridiculous clauses, all minority shareholders refused to sign the shareholders agreement. Now the majority shareholder is threatening to issue a special resolution and buy all our shares back for pennies (?).

What are my options?

Thank you in advance for all your responses.

 

[Mark T Jones]

How can he threaten to buy your shares back? they are your shares to sell or to keep as you wish.

He can't force you to sell him your shares any more than I can force you to sell me your car

 

[Bob]

Speak to @The Resolver . If anyone can help you, he will

 

[BjornB]

@Mark T Jones Exactly. But I think company's articles can be amended to allow the majority shareholder to purchase the shares from minority shareholder for a fair market value (?) which, according to him, is not a lot? What does the price depend on? Whos sets it?

@Bob Thank you very much, I'll send him a PM.

 

[The Resolver]

I assume the current Articles do not give him such an unfair right to buy back the shares at nominal value but as BjornB points out he has the required percentage to change the Articles against your wishes. While he may be able to put in place amended Articles, such does not protect him from a Petition to court under s.994 of the Companies Act 2006, that he is acting with unfair prejudice to minority shareholders. If you succeed then one outcome may be that he will be required to buy your shares at proper market price.

If you PM the name of the company I can check the current Articles for anything of relevance.

I think the first issue to address is what is encouraging him to wish to make the changes. Why does he want to so easily remove the minority shareholders? Is there a prospective buyer on the horizon and he is being greedy to want to have all of the purchase monies? If you and the other minority shareholder feel that the relationship has broken down then it may be time to negotiate an exit. But you must first take steps to show he cannot acquire the shares at an undervalue and you must show that you prefer not to sell. You may be able to do this without actually issuing a s994 petition. If there is a potential buyer then he would not want the proceedings to be issued in the first place.

Call me if you would like to chat through.