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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Hi, I have 1.4% shares in a private limited company that has

Resolved Question:

Hi, I have 1.4% shares in a private limited company that has a turnover of £11m. I know the company is worth around £20m, they have offered me £70k. I know that my shares are worth around £150k+ (a valuation 15 years ago rated them at £110k, and they had a far lower turnover and profitability). I am the only non board member shareholder.

It is unlikely that they will start again as they have been operating under the same name for 20 years and they have a strong reputation, and they are doing well.

What I want to know, is are my shares at risk? can I hold out for them to one day sell without any risk other than them possibly going out of business? which I don't think will happen. Can they do anything dodgy to de value my shares?

Given that they have been trying to buy them back for 15 years, I have assumed that they are unlikely to one day do anything like change the company name slightly and start a new company, just for the sake of my shareholding.

Am I right in this assumption? what are my risks? should I accept their offer of £75k, even though it is at least half their value, maybe more.
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 :

Do you have a shareholders agreement please?

Customer:

Yes I do

Alex Watts :

Good. What does it say about disposal?

Customer:

I must apologies, I am at the office today, the shareholders agreement is actually at home.

Customer:

Is there something I should look out for?

Alex Watts :

To see what it says about selling shares or them buying you out

Customer:

As far as I can remember, I have to offer them back to them, and they can make what ever offer they like, hence the £75k (in fact they started out offering my £13k, £75k was their latest offer) but I don't have to accept their offer. I have always turned down their offers as they have always been very low, in the £20k region. I have always believed that one day they would sell, which I still do believe they will, and when that happens I imagine I am more likely to get something more aligned to their real value.

Alex Watts :

Does it not say market rate or anything?

Customer:

not sure, I believe that they dont have to offer me the market rate, only what they are willing to buy them back for.

Alex Watts :

Ok - can you let me know later

Customer:

Yes, I will check tonight and then email you?

Alex Watts :

Of course, just come back to this question

Customer:

ok, to this page then?

Alex Watts :

Yes

Customer:

Great, thank you Alex, I will do that this evening.

Alex Watts :

Thanks

Customer:

Hi Alex, apologies for the tardy response, only I had to find the agreement, and then scan and convert to text - both of which took a while to sort. Anyway, done now, please see the following, it is the closest thing I could find to a reference to buying the shares;

Customer:

not dispose of any of their Shares or any legal or beneficial interest in
their Shares unless in compliance with the following provisions of this
clause or Clause 16.



In the event of a Shareholder transferring any interest in Shares in
accordance with the provisions of this Agreement to any person who has
not entered into any agreement with the Shareholders a substantially and
effectively the same terms as this Agreement it shall be a condition of
such transfer that prior to it being effected the transferee shall have agreed
by deed (a "deed of adherence") to be bound by terms and conditions
substantially the same as and not materially more or less onerous than
those contained in this Agreement and subject thereto with such
amendments as the Shareholders may agree in writing. At the request of
the Shareholder transferring the Shares or the transferee the Shareholders
shall enter into such a deed of adherence



Upon execution of a deed of adherence such transferee shall be deemed
to be a party to this Agreement and the transferor shall if it is no longer
a Shareholder be released from its obligations under this Agreement save
as to restrictive covenants and confidentiality undertakings and without
prejudice to any rights and/or remedies that any Shareholder or the
Company may have against the transferor in respect of any breach by the
transferor of any of its obligations under this Agreement or otherwise
prior to such date



Any Shareholder (subject to Clause 11) who wishes to transfer Shares or
any interest in Shares ("the Vendor”) shall give to the other Shareholders
(“the Offerees*) notice in writing ("the Transfer Notice") No Transfer
Notice may be served save in respect of the entire shareholding of the
Vendor The Transfer Notice shall specify the identity of the person (if
any) ("the Third Party Transferee") to whom the Vendor intends to sell or
transfer the Shares specified in it ("the Sale Shares") including the price
for the Sale Shares and all other terms offered by the bona fide Third
Party (if any) The Vendor shall in the event of a Third Party Transferee
having offered to purchase the Sale Shares make a full disclosure of all
terms offered by the Third Party Transferee The Transfer Notice shall
constitute an offer for the Sale Shares at the price ("the Sale Price")
which is the higher of: (1) the price (if any) for the Sale Shares offered
by the bona fide Third Party referred to in the Transfer Notice and (2) the
price which is agreed upon by the Vendor and the Offerees or, in the
absence of agreement such sum as shall be certified (at the request of the
Vendor or any of the Offerees within six months of the date of the
Transfer Notice) by the auditors of the Company or in the event of the
auditors being unable or unwilling to act then by an independent
Chartered Accountant (the said auditors or the independent Chartered
Accountant is hereinafter referred to as "the Expert" and who shall act as
an expert and not arbitrator) to be nominated at the instance of either the
Vendor or any of the Offerees by the President for the time being of the
Institute of Chartered Accountants as the fair value of the Shares on the
date of the appointment of the Expert under this clause as between a
willing seller and a willing buyer contracting on arm’s length terms


Alex Watts :

They can't make you sell them.

Alex Watts :

What you should do is get the business valued.

Alex Watts :

Then once you have this you know what your shares are worth

Alex Watts :

If they want to buy them, then all is well

Alex Watts :

If they do not - then you can keep hold of them

Alex Watts :

They need to pay a fair price for them

Alex Watts :

You can refuse to accept a lower amount and there is nothing they can do about this

Alex Watts :

Can I clarify anything for you about this today please?

Customer:

Thank you for this, this is kind of what I thought, which is good. So I suppose my other question is - I assume that given that I have a shareholders agreement, and that 'technically' they cant do anything to change this situation, that my shares are safe until they either sell, or offer something that relates to their value? I have already had a valuation produced by my own accountants, which had them valued at around £160k, which if they knew the reputation of this company, would probably see that that was conservative - good enough for me though, and I would definitely accept this.

Alex Watts :

Correct they can't do anything outside the agreement

Alex Watts :

Actually you are in a strong position - if they want your shares, they will have to pay for them!

Alex Watts :

Otherwise you can sit and hold tight

Customer:

Great, that is comforting to know, and so if they did anything that was seen to change my situation negatively that would be a clear attempt to penalise me, which wold be viewed negatively by a court?

Alex Watts :

Of course.

Alex Watts :

Can I clarify anything else?

Customer:

Ok great, that is comforting. In that case I am happy to wait to see what they do, hopfully one day sell.

Alex Watts :

Yes

Customer:

No, that is all, thank you very much.

Alex Watts :

If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.


Please remember that I am always happy to help if you have future questions, even if I am in Court I can normally respond within a few hours. For future information, please start them with ‘For Alex W’.


 


Please bookmark my profile if you wish for future help: http://www.justanswer.co.uk/law/expert-alexwatts/

Customer:

I'm try9ing to rate your service, but it just says - Your expert has not finished answering.

Alex Watts :

Let me change the format and you can try then

Ash and other Law Specialists are ready to help you
Expert:  Ash replied 3 years ago.
Try now :)

Alex

Expert:  Ash replied 3 years ago.
If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.

Please remember that I am always happy to help if you have future questions, even if I am in Court I can normally respond within a few hours. For future information, please start them with ‘For Alex W’.

Please bookmark my profile if you wish for future help: http://www.justanswer.co.uk/law/expert-alexwatts/