What is a shareholding worth and can a 50.4% shareholder/director wind up a limited company?

Discussion in 'General Business Forum' started by Andy Whitehead, Feb 13, 2019.

  1. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Hi, I’ve just discovered this fabulous forum and I’m hoping for a bit of guidance please! I’m not a businessman, apologies if this makes little sense.


    Four of us are shareholder/directors of a small Ltd company with no other employees. MD has 50.4% shareholding, Bod B 24.8%, Me 16.4%, Bod D 8.4%.

    Assets = £160k (essentially what’s in the bank + what’s owed by customers - what’s owed to suppliers), liabilities (remaining leases on building & equipment) = £60k.

    The company has been making a loss for a number of years.

    MD wants to retire and wants the company to buy back his shareholding.


    I have two questions:


    1. How much do we offer him? 50.4% of £160k, ie £80k? Or do we offer him what he would be likely to walk away with if the company was liquidated, ie 50.4% of £(160-60-??)? It’s a loss-making company and it is highly unlikely anybody from outside the company will be interested in his stake;
    2. Could the MD unilaterally wind up the company against our (3) wishes?

    Really hoping for some help please!


    Cheers,


    Andy.
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #1
  2. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    Shares are worth whatever someone is prepared to pay for them. Probably not a lot.

    No, they cannot put the company into voluntary liquidation on their own.

    If MD is owed £750+ other than shares then, theoretically, they could start the process to wind-up the company. But this would be a bit of a contrived route, costly and you will be able to watch with amazement how all the assets disappear in fees.

    Has the MD said what value they think they will get from any deal?

    Use that and work your way down (to £1!)
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
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  3. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

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    Lots of threads on this topic

    As @Blaby Loyal has said, without a shareholders' agreement outlining terms, the shares are worth what you all agree they are worth.

    Has he indicated what he wants for them?
     
    Posted: Feb 13, 2019 By: Mark T Jones Member since: Nov 4, 2015
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  4. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Thanks for your reply. MD is expecting something like £80k, ie 50% of what’s in the bank. If he really can’t start winding up proceedings unilaterally and nobody from outside will buy his shareholding then...? Is the value of his shareholding really down to what we remaining three are prepared to offer him?
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #4
  5. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

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    It's down to what you all agree

    His trump card is to resign as a director but retain his shares & control.
     
    Posted: Feb 13, 2019 By: Mark T Jones Member since: Nov 4, 2015
    #5
  6. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    £80k - jog on! What about the company's current liabilities and accrued liabilities?
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
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  7. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Outstanding leases on the building & equipment, maybe £60k. I think that’s probably it. We’ll need to move premises in 14 month’s time, sign a new lease etc. Just moving the kit is likely to cost ~£12k. Another ~£6k on much needed upgrades to equipment.
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
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  8. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Thanks Mark. When you say he can resign but maintain control, do you mean over the day-to-day running of the business as he is the majority shareholder?
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #8
  9. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    No, being a shareholder gives you no powers to conduct the day-to-day running of a company: that's what directors are for.
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
    #9
  10. Mr D

    Mr D UKBF Legend Free Member

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    He could merely get his percent shares worth of any dividends the company issues in the future and he could at shareholders meetings scupper some votes or be a major influence in others.
    Plus he can request a company audit every year.

    His directorship and shares are separate - resign as director he remains as a shareholder.
    And yes, very unlikely anyone outside the company would be interested in buying the shares.
     
    Posted: Feb 13, 2019 By: Mr D Member since: Feb 12, 2017
    #10
  11. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    [QUOTE="
    1. Could the MD unilaterally wind up the company against our (3) wishes?

    .[/QUOTE]

    Yes but would have go go down the Compulsory Liquidation route, via Court, if the other shareholders objected to a Voluntary Liquidation.

    However if the Company is insolvent Liquidation may be the only option. The Directors need to take insolvency advice.
     
    Posted: Feb 13, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #11
  12. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Hi Lisa.
    No, the company isn’t insolvent (though it is making a loss year on year). I’m guessing the compulsory liquidation route is an expensive one where ultimately we’d all lose out?
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #12
  13. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    Yes - compulsory liquidation is technically an option but would be a contrived result in this set of circumstances.

    That said, it would be an almost sure fire way to ensure the MD receives "bugger all" out of the company. In my 30 years experience I have never seen a return to shareholders in any form of insolvent liquidation.
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
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  14. Clinton

    Clinton UKBF Big Shot Full Member

    4,134 1,473
    To wind the company up a special resolution needs to be passed with 75% of the shareholders (by value) consenting.

    In these situations it's not about establishing the value. As already covered, nobody from outside will buy the shares. So what you need is not an argument about value but a sane and calm head that'll help all of you reach agreement, someone who'll broker a solution. Try talking to @The Resolver . The last time I spoke with him, a couple of weeks ago, he was very, very busy so he may or may not be able to assist. If he can't, get back to me and I can make other suggestions.
     
    Posted: Feb 13, 2019 By: Clinton Member since: Jan 17, 2010
    #14
  15. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    @Clinton @Blaby Loyal Thank you for your perspectives. I’ve been trawling this forum on and off all day, very glad to have found it!
    I guess we now sit down, think of a number - a small one - pitch it to the MD and take it from there. Not exactly looking forward to that particular meeting...
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #15
  16. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    Thank you - happy to help.

    Try and get some maths and science into your negotiating position and enter into any discussion or meeting from a position of strength. Look at the most recent balance sheet, know what the company's current liabilities are and what the medium to long-term commitments are as well. To me, just wanting to take half of what's in the bank account is naive and a try on.

    How much would you pay for the shares if they were offered to you and you had no prior connection with the business. The company is making losses ....
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
    #16
  17. Andy Whitehead

    Andy Whitehead UKBF Newcomer Free Member

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    Thanks Blaby. You’re right of course; I’ve been trying to think today as an outside investor and the answer is I probably wouldn’t! Not only would I get no return on my investment, I’d eventually lose that too.
    One thing I should have mentioned at the outset though; it’s the company buying back the shares from MD rather than us as individuals. Does this make a difference?
     
    Posted: Feb 13, 2019 By: Andy Whitehead Member since: Feb 13, 2019
    #17
  18. Blaby Loyal

    Blaby Loyal UKBF Ace Full Member

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    Ask the company's accountant (or a different one if there is a conflict with the MD shareholder) about 'buy backs'.

    I know it can be done now but it's outside of my tiny sphere of knowledge.

    It shouldn't have any impact on your dealings with the MD but there are bound to be pitfalls to trap the unwary.
     
    Posted: Feb 13, 2019 By: Blaby Loyal Member since: Jun 12, 2018
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  19. Clinton

    Clinton UKBF Big Shot Full Member

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    The company can buy back shares but can only do so out of retained profits (post tax). If it's an EIS company less than 3 years old then take specialist advice as some benefits can be lost.

    I don't think that's a good way to approach it. "Giving someone a number" is almost arrogant in these circumstances and I wouldn't be surprised if he finds the number insulting, and that's not conducive to reaching a settlement. I would disagree with @Blaby Loyal in that I don't think these matters should be approached from a position of strength (or weakness) but one of conciliatory gestures and compromises on both sides. The goal is to find a solution that works for all parties.

    This is a job for an expert, I don't know why you think you can do it yourself, especially when you are one of the parties to the transaction, but if want to do it on the cheap, good luck to you, you'll need it!
     
    Posted: Feb 13, 2019 By: Clinton Member since: Jan 17, 2010
    #19
  20. SteLacca

    SteLacca UKBF Ace Free Member

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    Whilst both Blaby Loyal and Clinton are correct in general terms, there are aspects that hinge on any shareholders agreement (which appears to be absent) and the M&As of the company. You need to look there first.
     
    Posted: Feb 13, 2019 By: SteLacca Member since: Jun 16, 2016
    #20