selling my 50% shares in a limited company

[LeeHayler]

hello everyone. I last used this site a year ago with a similar issue but now things aren't too good with my business partner. we both have 50% shares in a ltd company and he wants to take the business to another level and feels we both want different things and im also suffering with a lower back problem which is effecting my work. we have 2 vans with tools and stock for our gate automation company, and employ one engineer. I understand that being 50% each makes things harder and probably happens all the time. what are my options here? he has offered me ten grand for my shares.. I know we have 8 grand in the bank, invoices due in, 2 vans with tools, and stock.. how do I know im getting fair price and how do I put a price on all of this? say the vans are 5 grand each, 8 grand in the bank and we could be due in another 8 grand.. 26 grand obviously.. should I then be entitled to 13 grand? if I don't sell my shares to him, what steps can be taken by him..

 

[philmc1]

If you both agree that he should buy your business, but just arguing about the price, then don't do anything to cause the business to fail as both of you will lose out. Companies can be valued based upon asset value (your accountant should have prepared annual stat accounts and it will be here). This is always lower than 'what it is worth' unless the business is failing - you are only entitled to 50% of what the company is worth. Other ways to calculate the value of the company are available but will cost you money to prove this, eg 5 or 6 times net annual profit. If you want to stop working for the company, then you could become a 'silent partner' and just get dividends (this does not work in the long term). I would say, agree a price based on those things that are known (as you tried to do), this will value the company and if you are happy with 50% then sell your shares. If you ant more you could take deferred payments, eg. £a now and £b in 12 months for the shares , if not paid then the shares revert to you.

 

[LeeHayler]

Thanks for the information. If i say i dont wish to sell my shares or that i want more money for them and he doesnt agree to it, would he simply be able to open another company, move our engineer over to that and use half the assets to work within that business. What about our customer base? Is he only entitled to half of our customer listing? Im not sure what can happen if A: i refuse to sell, B: if i ask for more money and he doesnt want to pay.

 

[philmc1]

Hi from what you have said you are both joint shareholders and I assume directors or at least draw a salary each. What each or both of you can do is normally in a share holder agreement SHA (set up when the company starts). Unfortunately very many small / new companies do n ot write & sign one that covers all eventuality. Some SHA cover this type of break up, but if you do not have one the only way to enforce your rights is getting a legal person or 3rd party to help (both should agree to this and agree their findings / recommendations will be adhered to. Back to your specific questions, if he does not want to buy your shares or you cannot agree a price then nothing can happen. The assets of the company (customers, lists, employees, etc) are not 'owned' by the shareholders they are owned by the company (not the same thing). Therefore as an individual shareholder he has not rights to 50% of the company's assets. If you remain joint shareholders you have a stale mate. He could set up another competing company but you could take expensive legal action to protect the company / your shareholding (if not competing he can set up any number of new companies. I have worked with several private businesses where shareholders who are also brothers / family members / ex friends / ex spouse, etc have fallen out but continue to work together as it provides an ongoing income. To resolve it after any pro longed time usually ends up with legal bills to get to a resolution. What is the difference between what you want and he is willing to offer (do not need to reply on the forum). If close then agree a price and payment schedule that you can both live with and walk away. If the difference is so large / cannot agree a price, then unless you both agree a price and do not want to spend money on legal fees, then i would sit quiet and let him grow the business. The penny will drop that as the business grows it becomes more valuable and he is better to buy you out early.