Shareholder Dispute - Stonewalling Problem

[Frank_Frankie]

Hi all.

I'm looking for some urgent advice on a situation.

I've recently parted ways with a company in which I was a minority shareholder and director of, and we are at the point of share valuation. As is often the case, the other directors are claiming that my shares are worth nothing - and I can prove otherwise, plus I have had the company valued by an accountant. Therefore, we are at odds.

The shareholder agreement states that when an agreement on the value of the shares cannot be reached by all parties, then the valuation will go to an independent expert, who will value the company at market value. If the selection of the expert cannot be agreed on by all parties within a set period of days, then the expert will be selected by the Institute of Chartered Accountants.

I therefore recently informed the directors that as we cannot agree on the value of the shares, I would like to trigger this agreement clause and have an expert appointed.

They have not replied since, and I appear to be being stonewalled, plus we are fast approaching the deadline for us to agree on an expert. They seem happy to let the time run out with no dialogue whatsoever. I think they may keep stonewalling from now on, regardless of any follow-up communication from me.

Is this stonewalling within their rights, or are they breaking any rules here?

Has anyone got any advice for how to deal with a situation like this?

Many thanks in advance!

 

[ChrisCallaghan]

Hi @Frank_Frankie ,

I'm sorry to hear about the difficulties you're having with your co-directors.

It would be hard to say whether the 'stonewalling' is permissible - essentially this will come down to the terms of your shareholder agreement.

I would suggest it may be worthwhile engaging a solicitor to review and advise. Happy to make a recommendation if that would be helpful.

 

[Frank_Frankie]

Thanks for your reply.

There is another clause, which states that if a dispute arises between shareholders or related parties concerning the company's business, they must first attempt to resolve it through mediation. If mediation fails within 90 days, any party can escalate the dispute to arbitration under the Arbitration Act 1996. The arbitrator will be appointed by the Chairman of the Chartered Institute of Arbitrators.

Surely just ignoring the matter is a breach of the agreement.

 

[fisicx]

Talk to Graham @The Resolver - sorting these things is what he does.

 

[Tornado220]

Or they are rapidly trying to "devalue" the company ?

Another point, not sure if this applies, but do you know what type of shares you have, to my knowledge there are 3 levels one being more important than the next etc, although I guess the value would probably be the same in any event !

 

[Lisa Thomas]

Presumably they want you out of the picture so you have some bargaining chips if they want your shares. If you can't agree a sales price then don't sell them...

Second the advice of @fisicx to speak to @The Resolver

 

[Frank_Frankie]

Or they are rapidly trying to "devalue" the company ?

Another point, not sure if this applies, but do you know what type of shares you have, to my knowledge there are 3 levels one being more important than the next etc, although I guess the value would probably be the same in any event !

Yes, that's exactly what they're attempting unfortunately.

We had the company valued months before any of this, resulting in a healthy valuation, but since the parting of ways they've tried to devalue it dramatically, but without substance.

Thanks for the kind advice everyone. I'll approach your friend @The Resolver to see if there's a way forward.

 

[WaveJumper]

Can't offer anything else other than agree with the others @The Resolver is the forum member to speak too. And of course once or if they devalue the company to a silly figure - thats when I would turn round and buy them out

Speak to Graham

 

[eteb3]

I’d be interested to know if Graham thinks deliberately devaluing the company is possible grounds for a minority prejudice action. Feels like it to me, from the little I know

Out of interest are you still a director? Assume not? But if you are, their stonewalling of you in your capacity as director is on the face if it breach of duty

 

[Solvelaw]

If the agreement gives you the unilateral or bilateral right to apply to the expert, then you should be able to apply under the terms of that clause without their agreement. Presumably there is some good detail as to mechanism so you can apply for the expert to be appointed.

 

[The Resolver]

I’d be interested to know if Graham thinks deliberately devaluing the company is possible grounds for a minority prejudice action. Feels like it to me, from the little I know

Out of interest are you still a director? Assume not? But if you are, their stonewalling of you in your capacity as director is on the face if it breach of duty

The short answer so far as declaring an opinion as to the value of shares is 'no' especially if an argument is put forward as to an estimation of future trading but making decsisions tnat are not justifiable in tems of the commercial management of the business (e.g. taking on unjustifiable expenditure commitments by say employing family members - just one example) ) specfically in order to devalue the business could be. But it would still be difficult to argue succesfully.



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