Shareholder refusing to play ball

[Langy03]

My company is in dire trouble on the brink of insolvency.

I am majority shareholder with 80% of the shares and all the personal guarantees given to various antities in my name. Another 20% of the shares are owned by a somebody who did not pay for them but got the shares given to him for his expertise in the industry and future work that he should have done for the partnership. We have a shareholders agreement but the shares were never issued.

I have found somebody to take on the company with its liabilities, they will then own 75% of the company and would leave me with 25% but only on the condition that the minority shareholder gives up his 20%. The 20% shareholder is not playing ball and unwilling to relinquish his shareholding. He is asking to be kept on as a 5% shareholder giving me 20% or be given money in exchange for his shares. The company or myself have no money. The white knight who is willing to take on the current debt of the company is unwilling to pay money to the 20% shareholder and not want the 20% shareholder on board.

Anybody here has any suggestions?

 

[Williams lester]

Get a personal loan to buy his shares?

 

[Langy03]

Get a personal loan to buy his shares?

My personal credit rating is shot to pieces as I have not been able to pay myself for the last 18 months... Nobody will lend me any money.

Just a thought, as is decision not to play ball is putting the rescue package in jeopardy, could he be sued by other creditors if the rescue package falls through?

 

[Paul Kelly ICHYB]

Be blunt with him - if the business is insolvent, you could simply close it (OK, not that simple...) and the shareholders would get nothing!

You could then phoenix the company (a horrible, but practical practice) or start up a new one! There are things you need to be careful of, so I would consult an accountant, at least and, matbe a solicitor.

 

[Chris Ashdown]

The other person ownes 20% of the company, it does not matter to hoots what he does he ownes it and can refuse to sell it's totaly up to him

Sorry to be so blunt but you were the fool to sign the bank mandate and not include him or he was wise not to sign himself

Question why does someone want to purchase debts when its so easy to start another company, what sort of debts are you talking about

 

[Shahkti]

Be careful about ongoing trading if you are this near to insolvency. Running up further liabilities now could be awkward to explain later.

The 20% shareholder thinks s/he is making a compromise offer in accepting "only" 5%. It has to be brought home that 20% of nothing is zero, and the best way to get that message across might be to look at voluntary liquidation as in CVA or CVL. It might be worth bringing in an insolvency advisor on a very specific fee / task to help. If the message came from someone else, it might be more potent.

You need to think about whether the value of the business is in the ideas or in the trading aspects (name, brand, etc). It will help you get your head around whether "going under" is the end of the world or actually a way to move forward.

I don't know how much liability there is to other creditors. But bear this in mind as insolvency looms: your responsibility now is to them and not to shareholders.