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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 started a business with my sister a number of years ago and

Resolved Question:

I started a business with my sister a number of years ago and have 50% (40) equal shares with an initial investment of £53,000.
I resigned as MD and left the company 2 years ago due to ill health. I have not been invited to any meeting or informed of any major decisions, save that I have been provided with a set of accounts 9 months after the year end. My sister has now sent a letter stating that she is issuing a further 4,000 shares which I can purchase 2,000 for £15,000 if I do not then she will purchase them all increasing her share to 4040 ineffect complete control of the company. I asked if we could have a meeting and the accountant said I was not allowed anywhere near the business until invited to an AGM. If this was Sainsbury's BT or BA I would understand that my request for information would be rebuffed but I do not understand how she can do this to me legally. The current staff are all on very high salaries and I worry that this latest cash injection is to buffer this. Do I have any rights in this business?
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.
Hi,

Thank you for your question and welcome.

My name is XXXXX XXXXX I will assist you.

What year was the company formed?

Do you have a shareholders agreement?

Does your sister have the right to issue the shares under the articles of association? Generally speaking a right to issue shares and give up pre emption rights will only last for 5 years at which point she would need shareholder approval by special resolution to increase the share capital.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 3 years ago.

Hi AJ


 


The company was formed in 2002.


 


There is no shareholders agreement.


 


Julieanne


 


 

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

Thank you.

Does the company have Table A articles of association (un amended) and does it have an authorised issued share capital?

Kind regards

AJ
Customer: replied 3 years ago.

AJ


 


It has been 12 years since I saw any official paperwork and I can't say what is there. However as we are sisters there was an element of trust that neither party would do anything underhand.


 


I need to know was it lawful that she issued these shares without my knowledge and why am I not allowed any access to any information on a business I own 50% of.


 


If I want to maintain my 50% shareholding I have to have this £15k paid today.


 


Regards


 


Julieanne


 

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

Thank you.

I can only tell you if what she has done is lawful if you can tell me what articles of association the company has.

Normally if there is not a power to issue shares and give up pre emption rights under the articles of association you would need to pass a special resolution in order to do it.

Can you check at Companies House and see if you down load the articles?

Kind regards

AJ
Customer: replied 3 years ago.

Hi AJ


 


I have attached the articles as downloaded from Companies House.


 


I now see that having invested £65,000 in a business the Director of that company can basically do as they please with shareholders money and not include them in major decisions of the company regardless of the shares held, an a major decision is to issue further shares to increase their own holding and decrease the shares of others.


 


It would appear that Directors can also pay themselves what they like my sister increased her salary by £14k per year the day after I left having insisted I only take £8k a year for 4 years.


 


I had to pay the £15k as I did not understand how I could lose my 50% share because she and the accountant said so. I don't think I will ever see any return on this investment as she controls the company according to law.


 


It would be good to hear what you say.


 


Regards


 


Julieanne


 


Attachment: 2014-05-30_182721_articles_of_assoc_pjlocums.pdf

Expert:  Alex J. replied 3 years ago.
Hi

Thank you very much.

I will look at these and revert to you as soon as possible.

Kind regards

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

Thank you.

I have reviewed these articles. Can you confirm - are you certain there are only 80 shares in issue?

Kind regards

AJ
Customer: replied 3 years ago.

Yes there are only 80 shares.


 


It was supposed to be a 100 share company with 20 shares being available for staff incentives ie they would be offered shares in the company instead of bonuses, however this proved problematic so it was agreed only 80 shares would be the 50/50 split.


 


Julieanne

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

Thank you.

Unfortunately the company has an Authorised Share Capital of 10,000 shares. As a director she has every right to issue up to a further 9920. This is a power under S.550 of the Companies Act 2006

However she is obliged to offer you the shares first as you have pre emption rights.

In theory you have 14 days within which to respond and accept the offer or not.

The only other option you have is to ask what the need is for issuing the shares? If she is just doing it to force you out it could potentially be unfairly prejudicial under S.994 of the Companies Act 2006 and you could have grounds to potentially seek an injunction against it.

Do you think she is actually going to pay for her shares? If she does not then that is a big sign that this is being deliberately orchestrated?

I look forward to hearing from you.

Kind regards

AJ
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Customer: replied 3 years ago.

AJ


Thank you for that it was very helpful.


 


Regards


 


Julieanne