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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
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We are currently going through a shareholding dispute with

Customer Question

We are currently going through a shareholding dispute with a former director of my company. We had discussed (and almost agreed) for him to become a 33% shareholder last year, we then had a disagreement over the shareholding percentage, and as a result of this argument, this director resigned his position within the company.
Nothing was ever signed to pass a special resolution to finalise this additional shareholding (he wanted different classes of shares to be issued, so it needed to be done as a special resolution). But while a director, he had signed as a personal guarantor on some staretup funding we had received.
I have an email in writing from this former director to state that after having him removed as a personal guarantor for the start up loan, he would relinquish any interest in the company. The email states the following:
"I think I have made my position quite clear ­ I do not want to have further involvement in *the company* but you are still operating under a finance agreement that is supported by my assets. I have on many occasions stated I want this resolved asap but yet we seem to be ignoring these requests. I have in addition made it clear that once I receive written confirmation that I have been removed from the guarantee I relinquish any interest in *the company*. So I am concerned at why I have not been updated in nearly 1 month. In your email dated 25th March you asked for confirmation of my intent to disregard *the company*­ I really not sure what you are looking for hear as I have made it quite clear to both *the company* and *the finance company* that this is the case hence my instigating the processes in the first place, and highlighting this in numerous email communications."
Since this email was written, we have had him removed entirely from any liability on company finance. One week after having him removed as a PG on the finance, we received a letter from his solicitors saying that he was still pursuing a 33% shareholding in the company and 10 months of consultancy fees that he felt he should have been been paid (6 months after he resigned - the time it took to have him removed as a PG on the finance) and 4 months prior to him being appointed as a director when he had offered help the company as a favour.
None of the agreements (the director to receive a 33% shareholding and also a monthly consultancy fee were ever reduced to writing. This has been confirmed by the directors solicitor (in writing). Alongside that, the paperwork for the special resolution was never signed. I need to understand our position here - he is threatening to take this to court, but I don't know our legal standpoint.
There are various emails that have been referred to by his solicitor as evidence that this agreement would happen, and for the period he was working with us he did get paid the consultancy fees. One of the emails that my business parter (the other 50% shareholder) sent did refer to the director as an equal shareholder, but I have never put anything in writing.
Thanks!
Submitted: 1 year ago.
Category: Law
Expert:  Ash replied 1 year ago.
Hello my name is ***** ***** I will help you.
What is it you want to achieve please?
Customer: replied 1 year ago.

Hi Alex,

I want to understand what our legal position is here - My business partner and I built this company from nothing and I am not prepared to give 33% of it to someone who is going to do nothing. I am not prepared to give him anything.

The problem is I don't know what he is legally entitled to and I don't know how to approach the situation.

What is the legal viewpoint on him being able to gain a 33% shareholding if nothing was ever signed to agree this?

Thanks

Expert:  Ash replied 1 year ago.
The partner said he would reduce his holding for coming off as PG though?
Customer: replied 1 year ago.

He never had a holding in the first place - he said "that once I receive written confirmation that I have been removed from the guarantee I relinquish any interest in *the company*"

Expert:  Ash replied 1 year ago.
Ok. So that was the offer, on what basis does the Solicitor say there is a dispute?
Customer: replied 1 year ago.

His solicitor is saying that although this was never reduced to writing, the agreement was that the former director would:

1- become a one third shareholder in the company

2- provide consultancy services to the company and would be paid a fee of £1,200 plus VAT per month together with expenses, these payments to commence as soon as the performance of the company permitted.

We had a major falling out because I said I wasn't happy with him becoming a one third shareholder as he was only working 1 day a week and tried to renegotiate the 33%. He said it's 33% or nothing, at which point I said it's nothing.

He was angry because he had signed a personal guarantee (as had the other directors) on a £50k startup loan. He said if we didn't have him removed he would seek to gain 33% of the company through litigation. I agreed that we would have him removed as a personal guarantee if he relinquished any interest in the company and that there would be no further proceedings. He then sent me an email that said the following:

"I think I have made my position quite clear. ­ I do not want to have further involvement in *the company* but you are still operating under a finance agreement that is supported by my assets. I have on many occasions stated I want this resolved asap but yet we seem to be ignoring these requests. I have in addition made it clear that once I receive written confirmation that I have been removed from the guarantee I relinquish any interest in *the company*. So I am concerned at why I have not been updated in nearly 1 month. In your email dated 25th March you asked for confirmation of my intent to disregard *the company*­ I really not sure what you are looking for hear as I have made it quite clear to both *the company* and *the finance company* that this is the case hence my instigating the processes in the first place, and highlighting this in numerous email communications."

I proceeded to have him removed as a personal guarantee. This process took 6 months because the finance company were being extremely difficult and we had to have him replaced with an alternative guarantee.

As soon as we had completed this, the former director had his solicitor send us a letter to state that "It is clear the full terms of the original agreement were not implemented, so the client requires completion of transfer of 33% of the shares in the company and the consultancy fee from May to August 2014 (when he didn't even work for us) and February to July 2015 (after he had resigned, but was still listed as a personal guarantee).

What I need to understand, is what my legal standpoint is. He is trying to get 33% of the company and £12,000 (plus VAT) in consultancy fees from me. He is trying to do this after sending me the email I listed above, stating that he would take no further action. I am not prepared to give him either of these things but I don't know what the law would say.

Thanks

Neil

Expert:  Ash replied 1 year ago.
Unless that was agreed then you owe him nothing. If it was never said or agreed then he is not entitled to 1/3rd nor consultancy fees.
If he never made sure it was agreed beforehand then it is his own fault, he should have done so and therefore you owe nothing.
It is only if it was discussed and agreed you would give him 1/3rd or consultancy fees would you be liable.
Can I clarify anything for you about this today please?
Alex
Customer: replied 1 year ago.

Nothing was agreed in writing but a 33% shareholding had been discussed. We never signed the paperwork for the shareholding.

He was also paid £1200 per month for the period he was a company employee, but he is claiming for 10 months outside this period.

If you can clarify the legal position around that I would be grateful.

Thanks

Expert:  Ash replied 1 year ago.
He can't claim ten months unless that was agreed. Same for the shareholding, unless it was agreed, rather than discussed then it can't be claimed.
Does that help?
Alex
Customer: replied 1 year ago.

Hi Alex,

Final question - what would class as an "agreement" rather than a discussion?

Thanks,


Neil

Expert:  Ash replied 1 year ago.
Something where you say, we will offer you this and the other side says I accept!
Alex
Expert:  Ash replied 1 year ago.
Hi

I am just following up to see if there is anything else I can help with?

If you have not done so already might I ask you to rate my answer before you go today please, the button should be at the bottom of the screen.

If you need more help please click reply.

Alex

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