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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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I am a 20% shareholder in a building company in UK which has

Resolved Question:

I am a 20% shareholder in a building company in UK which has traded for 20 Months
I have had my accountant look at the management accounts and they have confirmed that we have currently accumulated profits of approx £400K.
I have been the main driver of the company to date and I am the face that most people associate with our company.
I am leaving the company and am wondering if I am entitled to a 20% share of the current profits earned and if so how can I press the other 3Nr Directors to pay me out of the company profits
I also want to sell my share of the company back to the other directors
Is it unreasonable to push for the full 20% payment and sell the share back to the company for a nominal sum ?
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 :

Is there a shareholders agreement? Please note it may be the morning when I can respond.

Customer:

No signed shareholders agreement. Agreement discussed briefly but never agreed. Very loose agreement with only share holding agreed

Alex Watts :

When is the AGM for the previous year end?

Customer:

AGM was July 2013

Customer:

I know that you probably require all information but I just need to know that in general as a shareholding director am I entitled to share of profits on leaving a company. The company has money at Bank in excess of £500K so I could not be seen as taking monies that would put the companies viability in jeopardy

Customer:

Question not yet answered

Alex Watts :

Were dividends declared in July 2013 please? Sorry for the overnight delay

Customer:

Profit to year end which was July 2013 were a nominal sum of £2500 as the company had spent 6 or 7 months trying to get work started

Customer:

Management accounts to end of Jan indicate a profit margin of £320k and since then there has been claims settled which brings the current profit for the year to date to £500K

Customer:

Is it normal for a leaving shareholding director to get his/her share of profits to leaving date ?

Alex Watts :

Was there a resolution to the dividend please?

Customer:

Alex

Customer:

Alex I have no idea what you mean. I appreciate that if I am pursuing this further I will need to get expert advice. For now we have a very simple agreement. One director owns 40% of the company and the other three of us own 20% each. There is no legal document in place. Profits for last year were negligible and not distributed. Currently we have profits in excess of £500K. Is it normal for a leaving shareholding director to get paid a sum equal to their percentage profit on leaving ?

Alex Watts :

The answer is no.

Alex Watts :

This is because if there had been or will be a declared divided of say £1 per share for example, you would be entitled to that.

Alex Watts :

But if you give up your shareholding before the current financial year and AGM then you are NOT entitled to those accumulated profits

Alex Watts :

You need to wait until there has been a declared dividend, of course there may not be one

Alex Watts :

If there is an excess of cash in the Company, this is only determinate to the value of the share, not your entitlement to take that cash out.

Alex Watts :

If you sell M&S shares then you are not entitled to a share of their bank account.

Alex Watts :

It is only when there is a declared AGM are you entitled to have money out

Alex Watts :

Can I clarify anything for you about this today please?

Ash and 4 other Law Specialists are ready to help you