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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3653
Experience:  Solicitors 2 years plus PQE
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HelloI am a shareholder in a maintenance company, owning

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Hello I am a shareholder in a maintenance company, owning appx 25%. My former three partners made me an offer for my shareholding last summer; 15k payable over 15 months. I declined this, believing that a fairer offer would have been circa 50k. The company has been trading appx 10 years. During my time at the company (2005-2010) we were turning over appx 1M pa and making a reasonable profit. I understand that recent profits have been in the region of 60k pa. I now understand that my former partners are setting up a new company with the plan of running down the old company, in order to avoid paying me dividends or buying me out. We all started the company together and vowed that we would treat each other fairly. Should they be able to do this, my "investment" will have effectively been stolen from me, or at least that's how I see it. Do I have any avenues available to me to ensure that I can protect this shareholding? Many thanks.

Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
Do you have a shareholders agreement?
Are the other shareholders directors? Do you know whether they have set up a new company?
Kind regards
AJ
Customer: replied 2 years ago.

Hi AJ

Thanks for your response.

I don't have a copy of a shareholders agreement, so I couldn't give you much information without a little uncertainty.

We didn't formally set up an agreement initially. This was only an afterthought, and whether it was signed by all by the time I left them I couldn't really say. (I do think one is in place though - sorry to be vague)

The other three shareholders are directors, yes.

I have it on good authority that a new company is being set up, quite whether it has yet remains to be seen. I am keen to be able to steal a march though, hence the enquiry.

Regards.

Ian

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
Does the company have any tangible assets?
Does it have a trading history and goodwill?
Feasibly what will they actually transfer to the new company? Good will, long term contracts etc?
Kind regards
AJ
Customer: replied 2 years ago.

Hi AJ

Assets would be limited, except a few vans really (say 4 or 5).

The company has a good trading history and in terms of what will transfer to the new company it is more realistically the goodwill.

To my knowledge they have much repeat business, but no long term contracts as such.

I was instumental getting the company off the ground in 2005. Their offer to me last year was based upon the average (not the total) of six or seven years profits, divided by four.

I am guessing I have no recourse, but, in my eyes, because I won't go quietly with their insulting offer, they are looking to cut me out altogether.

Regards.

Ian

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
Firstly you do have recourse against them - to divert the assets and business away from a company to another company creates a number of issues and possibilities to bring a claim.
The issue I have is that your claim would be alot easier to describe if we knew 1) Whether there is a sign Shareholders agreement and 2) What the obligations are in the shareholders agreement for example you may have a contractual claim if their is an obligation on the shareholders to act in the best interests of the company.
In light of this I will explain the position according to statutory obligations.
1.The Law
- In a persons role as a company director they have a general obligation under S.172-S.177 of the Companies Act 2006 to act in the best interests of the company;
- As a shareholder a person has the right not to be unfairly prejudiced under S.994 of the Companies Act 2006.
2. The facts
- In their roles as directors they are clearly a) diverting business away from the company to which they have a responsibility b) acting in conflict of interest;
- In their role as shareholders they are clearly being unfairly prejudicial by deliberately diluting your interest in the company.
3. Remedies:
- As a worst case scenarios you can bring a derivative action under S.260 of the Companies Act 2006 for breach of director duty;
- Or Under S.996 petition a claim for protection against unfair prejudice.
- These causes of action are a worst case scenario.
- Lets assume therefore (for the sake of forming an answer) that your end game is to exit the company with a fair payment for your shares? On that basis what I would recommend you do is the following:
(i) Get a copy of the shareholders agreement and see if there is any contractual provision they are breach;
(ii) Using the Annual Accounts work out how much they have sapped from the company;
(iii) Find out as much info as you can on the new company (www.companieshouse.gov.uk) - see if any of them are registered as directors.
- Once you have the above information take it to a local solicitor and write to the directors detailing your belief that they are in breach of their duties as directors and unfairly prejudicing you as a minority shareholder. Say that if they do come up with a fair offer to purchase your shares (such offer disregarding the value they have taken) or as them to commit to using a third party valuer, say you reserve the right to take all action available to you under the Companies Act. This letter has to come from a solicitor as it will give it added gravitas that you have been properly advised and they will take you seriously.
I look forward to hearing from you.
Kind regards
AJ
Customer: replied 2 years ago.

Brilliant! Thank you, AJ.

I will keep my cards close to my chest and act when the time is right.

These people, together with the person that they are receiveing "advice" from, were all close friends to me at one point. You never can tell!

Thanks again. Have a good Christmas.

Ian

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
No problem.
I wish you the best of luck.
Kind regards
AJ
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