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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3695
Experience:  Solicitors 2 years plus PQE
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I am a director and shareholder of a company based in England.

Resolved Question:

I am a director and shareholder of a company based in England. We have a standard memorandum of association, and there is no security or debenture on the assets of the company. We teach companies innovation and the company has a brand, intellectual know how etc.

My fellow director (who is also a shareholder) want to transfer the intellectual assets of this company to another company we own. The reason for doing this is to protect the assets from the actions of another person, who is one of the other shareholders and is detrimental to our company and brand.

Between us we own 40% of the share capital of the current company. Two other shareholders own the rest, but they are not directors and there is no shareholder agreement.

I have several questions.

1. Can we make the transfer without reference to the other shareholders. We have held board meetings to express concern at the actions of the aforementioned.
2. Does there need to be some financial transaction for this?
3. What paperwork do we need to complete to make the transfer legal
4. Does anything need to be submitted to Companies House, and if so, what?

Thanks
Submitted: 3 years ago.
Category: Law
Expert:  Ash replied 3 years ago.

Alex Watts : Hello my name is XXXXX XXXXX I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return. There is no need to wait here, you will get an email when I reply.
Alex Watts : Would the other shareholders have any or the same holding in the new company please?
Customer:

The other shareholders would have no shareholding in newco. One of those shareholders was had a debenture in the current company, but that has now been satisfied. The other shareholder has no security.

Customer:

The current company would continue to trade under licence from the new IP holding company, so it will still have value

Alex Watts :

1. Can we make the transfer without reference to the other shareholders. We have held board meetings to express concern at the actions of the aforementioned. - Yes, but you MUST act with the best interest of the Company. If you do not then you may in breach of your duty

Alex Watts :

2. Does there need to be some financial transaction for this? - Yes. In order for there to be an effective transfer you must pay the market rate for these assets. There needs to be an invoice and then a payment from one Company to another.

Alex Watts :

3. What paperwork do we need to complete to make the transfer legal - Ideally a contract between Companies and then invoice - payment.

Alex Watts :

4. Does anything need to be submitted to Companies House, and if so, what? - No nothing.

Alex Watts :

Can I clarify anything for you about this today please?

Expert:  Alex J. replied 3 years ago.
Under S.190 of the Companies Act 2006 this would almost certainly be classified as a Substantial Property Transaction. You would have to obtain shareholder approval by special resolution or face personal liability for the transfer of those assets and potentially have the transaction set aside. The key elements are that you are transferring a non cash asset to a company which you are connected to and you are a director of the transferor. The meaning of substantial is contained in S191 - An asset is a substantial asset in relation to a company if its value—(a)exceeds 10% of the company's asset value and is more than £5,000, or(b)exceeds £100,000.I suspect in this case the assets will be substantial as they represent all of the company's goodwill.A special resolution to approve this would require at least 75% of the voting share capital to vote in favour of it.Kind regards AJ
Customer: replied 3 years ago.

Hi,


 


Thanks for this information. We are not transferring physical assets (computers, stock etc, nor customers), but only the name (which we are changing anyway) and the know how of our programmes, which are not protected in any way, and could be easily replicated by another company, given the right intellectual resource.


 


The secured loan to the company was £16,000, which has now been settled. Does that mean that the all the assets are worth £16k?

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

It does not matter that is not a physical asset. It only matters that it is a) a non cash asset and b) substantial.

Even if it could be replicated by another company it is still an asset of this company and if it represents more than 10% of the net assets of the company and is more than £5k, you will have to obtained shareholder approval in order to transfer it to a company you are connected with.

Can you confirm exactly what you want to achieve? Effectively there is a dissenting shareholder you dont want involved in the company any more? Would it be possible to buy them out?

Kind regards

AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3695
Experience: Solicitors 2 years plus PQE
Alex J. and other Law Specialists are ready to help you
Customer: replied 3 years ago.

Hi,


 


This is complicated! This company bought the assets from another company back in June in a financial transaction. A rogue director connected with the previous company is a shareholder of this company, and I would like to distance this business from him, if possible.


 


What options do we have?


 


I assume we could just go and start another company, and create a new brand name and deliver the same content, as it is not protected?

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

If he is only a shareholder he is not going an affect on the business. It is only if he is a director that it will cause problems.

Is there a potential claim being mooted by the old company?

Does this shareholder accept you want to go your seperate ways?

Kind regards

AJ
Customer: replied 3 years ago.

Hi,


 


The rogue person is only a shareholder of the current company.


 


There is no claim by the company from which we bought the assets in June 2013, as that is in administration and the assets and goodwill were bought in a pre-pack agreement.


 


The directors of the current company met with this person and offered him the opportunity to work as an agent for us and to be remunerated on sales performance alone. He rejected this and has now set up another company in South Africa, which trades under the same name. Do his actions constitute "going separate ways?"

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

I am afraid not as he is not director and a company is separate legal entity.

What you may be able to do is apply to court on the basis that it is a partnership that has broken down and the assets, ie the company should be broken down and sold.

What would be the cost of simply starting a fresh? Has he used any of the company assets in South Africa?

Kind regards

AJ