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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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A small private limited company with 6 share holding directors.

Resolved Question:

A small private limited company with 6 share holding directors.

As a result of a domestic dispute five of the other directors have decided they wish to remove me as a director.

Questions: Are they allowed to do this?
If they are, what is the procedure for my shares, as I believe can't hold them
as a member of the general public so will have to sell them back to the
remaining directors at a price agreed to be the share value at the time?

What would happen if I did not agree with the price and did not want to sell
or none of the directors wished to buy the shares? Thank you.

Alan Price
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 Directors agreement please?

Customer:

I have posed this question as if it relates to me as it seemed a simple to put it, but I am in fact putting the question for a friend, so the answer to your question is, I don't know if there is a Directors' agreement. Hope this helps.

Alex Watts :

OK - I will assume not then for the purposes of this

Alex Watts :

If there is then that Directors agreement would govern what would and would not happen

Alex Watts :

Are they allowed to do this? - He needs to check the memorandum and articles of association. However generally the answer is yes.

Alex Watts :

If they are, what is the procedure for my shares, as I believe can't hold them as a member of the general public so will have to sell them back to the remaining directors at a price agreed to be the share value at the time? - Well they are removing him as a Director, not shareholder. You have not said he is being removed as shareholder. To remove as Director then need to pass a resolution. But he will remain a shareholder until bought out

Alex Watts :

What would happen if I did not agree with the price and did not want to sell or none of the directors wished to buy the shares? He can't be forced to sell if the price was not right. The Company should be valued by an accountant or other professional and then he would be given his price from that. But he will be a shareholder even if not a Director.

Alex Watts :

Can I clarify anything for you about this today please?

Customer:

Thank you for that, it answers most of the points. The only thing I'm not sure about is the last point. If she is removed as a director she will also be asked to leave the company as she is the wife of a director and they are getting divorced. When she leaves the company she will be just be a member of the public with shares in a private company, and I did not think that could be possible as if I am right in thinking that it is not allowed for a private Co. to sell shares to the general public. So know what?

Alex Watts :

Again it should be in the articles etc about disposal of shares

Alex Watts :

Normally it would be sold to other members, but at market rate.

Alex Watts :

Can I clarify anything else?

Customer:

A final question, would she be compelled to sell them on leaving the company even if she was not happy with the price offered, or could she leave and still keep the shares?. Which would then have a situation of a member of the public outside the company holding shares in a private company which I did not think would be allowed.

Alex Watts :

No generally not.

Alex Watts :

Does this help?

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