Shares Question

[Salonica]

Hi all,

Newbie here but been a lurker for a while - I wonder if someone
could help with an issue that is really getting to me at the moment.
It is probably not an uncommon problem:

OK a few years ago I set up a Ltd company and invited a collegue to join me.

We both received £1 ordinary shares each out of 1000 shares.

We were both directors although I was the only one actually working for the company albiet part time at that stage.

After the first year and with the company not making any money at all(and other issues ) we decided to go our seperate ways. The other person resigned their directorship and the "understanding" was that the share
would be returned.

I gave up my job and have continued to run and build up the business - it's not cash rich but is at least paying a wage with no debts. Despite a few conversations, forms sent and requests over a three year period the share has still to be transferred back.

I would like the option to pay a shareholders dividend but obviously not while she holds a share. Whilst the person in question has agreed to meet to resolve this she has failed to turn up on three occassions.

Without arguing a verbal agreement in court (which would be more expense than it's worth) is there any way I can force her to hand over the share? Could I dilute her share by issuing the remaining unallocated shares?

If all else fails could I simply close the company and open a new one?

What can I do know please as this has been going on too long??

Many thanks in advance.

 

[bwglaw]

I am presuming there is no Director Service Contract or Shareholders Agreement in place. If as you say you only have a verbal agreement and wish to avoid going to Court then I suggest that you try and negotiate buying her share.

You cannot 'dilute' a share but you can transfer it to the remaining shareholders. This I see is the problem. If you liquidate the company it is likely to cause more problems and the shareholders must agree to any special resolution to dissolve the company. If you allow the company to run itself to the ground this may fall back on you as a Director. There may be a way round it but I would not mention how on this forum

The easiest way to resolve this is to try and get that shareholder to sign an agreement to transfer, even if it means a buy out because it is virtually impossible to force a shareholder to sell their shares especially without a Shareholders Agreement.

This is one of the reasons why we advise our clients to sign Director Service Contracts to avoid this problem when someone resigns as a Director

 

[Salonica]

Thanks for the quick reply - appreciated!

I will continue to try and get some sort of agreement with her - I have tried in the past but it gets a little frustrating. Thought it would be better though to know what options are available so thanks for that. Lesson learned.