Startup stalled!

[BabaYaga]

Hi All,

Hopefully a straight forward one as we haven't started trading....

We created a start up a few months ago and so incorporated a company.

There is no share agreement or directors agreement.
The company has not built a solution - so no asset.
The company has not traded.
The company is solvent (and just has the majority of the original investment) with no outstanding debts.

There is an email between all shareholders which sets out shareholding and respective investment.

1 of the directors made a commitment to invest X amount of cash which allowed him a greater proportion of shares. His financial circumstances have changed meaning he can no longer meet this financial obligation but wants to retain his level of shareholding - obviously will upset the other shareholders.

The other 3 directors (including me) have agreed to stop working while we resolve this.

3 Directors hold 80% of the company (the ones in agreement).

Am I correct in thinking that we can offer to buy back the shares of the director at the original value and then wind up the company?

Am I missing anything?

 

[Scalloway]

Yes the shareholders can buy the shares of another shareholder. The price paid will be a matter of negotiation.

 

[BabaYaga]

On the basis that the company has no assets, no potential investors and not yet trading we plan to offer the shareholder the same price as what he paid which we believe is a fair price.

If he refuses to accept our offer do we move on to an MVL (Members Voluntary Liquidation) or strike off?

We want to move stuff like the IP so far from oldco to newco and a straight forward strike off doesn't appear to support this.

 

[Mr D]

The shareholder can sell for whatever price they wish. If you do not like their price you do not buy.

Have you thought of not buying the shares and simply winding up company anyway?​

 

[Mr D]

Sorry, it has no assets but has IP?

 

[BabaYaga]

The shareholder can sell for whatever price they wish. If you do not like their price you do not buy.

Have you thought of not buying the shares and simply winding up company anyway?​

We own an 80% shareholding so can force the wind up, although I shouldn't care what happens to his shares? His investment is sat in the bank account. I'd like to do the right thing at the end of the day, no malice in intended, we just want to crack on again.

 

[BabaYaga]

Sorry, it has no assets but has IP?

Sorry my bad, its stuff like the domain name - we'd like to continue using it.

 

[TODonnell]

I guess it's down to: Is it easier/cheaper to buy him off, or, just walk away from him and start again?

In practice, how can he stop you guy setting up elsewhere, if you want to play hardball?

Plan A is buy him out if that can be done quickly and cheaply and saves you time and litigation.
Plan B is to leave him with whatever he's got (and no revenue, to him, from it) and start again.

Plan B should make him think more favourably about Plan A, if he gets the idea you're serious about it.

No anger, no flare ups, just keep cool.

Have a friendly chat with him. Don't give him a reason to turn prima donna or vengeful. Try not to put anything in writing (e.g emails 'explaining your position'), until you have a legal agreement to be signed.

My 2p. I am not a lawyer.

 

[billmccallum1957]

1 of the directors made a commitment to invest X amount of cash which allowed him a greater proportion of shares. His financial circumstances have changed meaning he can no longer meet this financial obligation but wants to retain his level of shareholding - obviously will upset the other shareholders.

Why not just reduce his shareholding pro rata to the level of investment?

e.g. if he offered £20K for 20%, but only came up with £5K, then reduce shareholding to 5%.

 

[BabaYaga]

Why not just reduce his shareholding pro rata to the level of investment?

e.g. if he offered £20K for 20%, but only came up with £5K, then reduce shareholding to 5%.

I didn't think this was allowed as they are his shares to do with what he wishes?

 

[billmccallum1957]

If the original agreement was £? for 20% and he doesn't pay £?, then he doesn't get the shares.