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leanne-jones
leanne-jones, Barrister
Category: Law
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Experience:  Barrister
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I am a minority shareholder in a business I build from scratch

Customer Question

I am a minority shareholder in a business I build from scratch over the past 3 years. My agreement within the majority shareholder was I would complete 3 years and then receive 10% of the valuation of the company. The majority shareholder is now asking me to sign a board resolution to assign unequivocal power to his daughter so she can open a Bank account on behalf of the company. I completed what we agreed in February and he is now trying to coerce me into signing the document in order for settlement to be made. Where do I stand legally if I sign the document, whilst stating it was done under duress, whilst being coerced into doing what the majority shareholder wants?
Submitted: 3 years ago.
Category: Law
Expert:  leanne-jones replied 3 years ago.
Hello - my name is Leanne and it will be my pleasure to assist you today.

I assume the power to assign is your 10% power?
Customer: replied 3 years ago.

Yes, both shareholders/ directors have been requested to sign. The majority shareholder is the brother-in-law of the beneficiary owner.


 


 

Expert:  leanne-jones replied 3 years ago.
If you do not sign what will happen?
Customer: replied 3 years ago.

This is a portion from a threatening email received yesterday:


 


"If you are not going to sign the documents required let me know by this evening and I will ensure the company takes the appropriate action as Frank has already invested greatly, that’s why the business is here today! Its time it stood on its own two feet."


 


What has occurred is the beneficiary owner has undertaken a new project and has run out of funds. This project was entered without any discussion with me and I have no relationship with this other business. He now wishes to setup finance facilities with a new Bank, which i have agreed to; however I have stated my name should be on the account as the director. He has stated no and that his daughter is the only person to be listed.


 


I have discovered the majority shareholder has a history of aggressive, fraudulent behavior; however he has operated within troubled countries where the judicial system has not been strong enough to hold him to account.


 


He has stated that if I do not sign, then he will apply a 200% interest rate to any funds. what he will likely do is instruct the accountant to make sure the company does not make any profit and he receives everything.


 


My issue, is I have departed the position as the MD and now wish to exit as the Director under our gentleman's agreement. I have delivered a multi million dollar business and now it is time for him to settle with me.

Expert:  leanne-jones replied 3 years ago.
Do you have anything in writing as to what was agreed previously?
Customer: replied 3 years ago.

I have a trade license with me listed as 10% director with articles of association.


 


The gentleman's agreement was as follows:


 



  • FM to provide all financial investment required in return for 90% of the company.

  • DM to commit 2-3 years to create and establish a business independently of Sabre in return for 10% of the company.

  • FM to remunerate DM on completion of his tenure.

  • DM to be paid a daily rate for time in the Middle East only, and payment for all other days to be included within the 10% (Dividend and Final Remuneration/ Settlement).

  • FM to ensure DM has access to all funds made by the business. The exact words were, “I want you to be able to touch and access your percentage at any time”.


 


DM is me - David Munro. FM is Frank McDonald

Expert:  leanne-jones replied 3 years ago.
Did you ever have 10% or is he refusing to give you the 10%?

Customer: replied 3 years ago.

I have the 10% listed on the trade license. I received 10% of the profit for 2010 and 2011; however that was after many problems.


 


I have never received the 10% dividend for 2012. It was to part of my settlement. I resigned in October and handed over to my replacement (who I recruited) in February. I have requested a date for settlement and received generic timelines in return with no commitment. I have lost any faith or trust with these people. I have built an excellent company, which was a start up. He has received $4.6m in profit from his returns within the timeline, which is unheard of for a start-up. It is now time for him to settle with me.

Expert:  leanne-jones replied 3 years ago.
Are you listed as a shareholder at companies house?
Customer: replied 3 years ago.

Yes

Expert:  leanne-jones replied 3 years ago.
Thanks. In that case your 10% is protected. However if you did sign over clearly this has significant implications. You are only able to use the issue of duress where an illegal or immoral act is threatened.

For example physical harm or the threat will make you bankrupt. If it is just an deal which is not favourable you can not claim duress.

But if you are named on the Companies House register that means that you have security and your shares.

Only late in the 20th century was escape allowed if the threat involved illegitimate economic harm. A threat is always "illegitimate" if it is to do an unlawful act, such as breaking a contract knowing non-payment may push someone out of business. However, threatening to do a lawful act will usually not be illegitimate.

Therefore unless the agreement prevents otherwise you should not sign it to lose your share. In any event if they wanted you out there would have to be a special resolution in which case you could claim minority share rights.

I hope that your question has been answered and if I can be of any further assistance please do not hesitate to contact me.




Customer: replied 3 years ago.

Thank you for the point on duress. Does the content of email below constitute placing someone under duress:


 


"If you are not going to sign the documents required let me know by this evening and I will ensure the company takes the appropriate action as Frank has already invested greatly, that’s why the business is here today! Its time it stood on its own two feet.


 


Let me know your decision by tonight and don’t ask me anymore about Dave Munroe because I am done with that as well, you have been told.


 


Damages to the business will be your responsibly, I have asked you enough times to sign."


 


I also appreciate signing the document has significant implications, as his daughter could mortgage the business and under take actions without my knowledge, which could make me liable, as I am a director. My concern is to not allow people to use my name unethically or illegally. I've unfortunately got myself involved with suspect individuals and wish to break away ASAP.


 


Can the gentleman's agreement I have be used in court, or does it have to be a legal contract?


 

Expert:  leanne-jones replied 3 years ago.
No it does not because it does not say what the 'action' will be. If he said he would wind up the business or threaten to hurt you, that would be duress.

Yes the gentlemen agreement can be used in Court. Ideally a signed contract by both parties is better, but at the end of the day an agreement is an agreement.

Does this help?

Customer: replied 3 years ago.

Thank you. He is also a UK citizen, as am I. Can I take him into court here in the UK for a business in the UAE?

Expert:  leanne-jones replied 3 years ago.
No. It would need to be there unless the deal was done in the UK.

Hope that helps.

Customer: replied 3 years ago.

OK thank you. Can I appoint a UK lawyer to lodge a case in the UAE?


 


My next step is to register a complaint with the authorities, along with the Bank. I want to close the matter ASAP and have my name removed from the license.

Expert:  leanne-jones replied 3 years ago.
http://www.dlapiper.com/

Good luck with this.

Expert:  leanne-jones replied 3 years ago.
I'm just following up with you to see how everything is going. Did my answer help?


Leanne

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