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Alex J.
Alex J., Solicitor
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Experience:  Solicitors 2 years plus PQE
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When my partner and I set up our business we had 38% shares

Customer Question

When my partner and I set up our business we had 38% shares each in the company and gave another 24% shares to an employee. She turned out to be a nightmare and very nearly destroyed the business. We want to get rid of her.
She didn't pay her £24 for the shares and our accountant says we can take them back if I give her 15 days to pay the £24 and she fails to do so.
Is this true and do I have to do it in a particular way ? I have sent her an email telling her this but she says as we gave her the shares she doesn't have to pay the £24
I actually agreed a deal with her to purchase her shares, I gave her what she wanted but we didn't have it in writing. Now she says she wants to keep them. She no longer works in the company
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
If the shares are unpaid and listed as unpaid in the company accounts you can make a call on the shares for them to be paid in full. If they are not paid in the time limit they can forfeited by the company. The time period of 15 days may be correct but it depends what the articles of association say. They will have section on forfeiture? Do you know what type of articles you have?
If you paid her for the shares, what has she done with the money?
Kind regards
AJ
Customer: replied 1 year ago.

Hi AJ

I need to ask my accountant about the articles.

I didn't know at the time but Ellie, the person I want the shares back from told my other partner Jean a lot of lies about me including, I'm a drug user, an alcoholic, I abused my wife...etc all lies...so my other partner didn't want to work with me any more. I wanted to have 100% of the shares. Ellie was going to leave so I gave her furniture, office equipment and a laptop for the shares. She now says that she wants to keep them because Jean and I have worked out what she was doing. But I never got the agreement in writing

Expert:  Alex J. replied 1 year ago.
Hi, Thank you. Can you confirm what articles you have so I can confirm the forfeiture issue? Does the company currently have many assets?
Customer: replied 1 year ago.

The company currently owes me about £40k and my other partner about £20k. it is only breaking even at the moment and we are not taking a wage.

We can grow the company but don't want to do it while the other person has the shares. I will let you know about the articles when my accountant replies. Thank you for your help

Dave

Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Have you thought about maybe putting the company into administration, ditching this shareholder, taking the assets and starting again?
I look forward to hearing from you.
Kind regards
AJ
Customer: replied 1 year ago.

She has said she will take action if we do that.

Expert:  Alex J. replied 1 year ago.
Hi
Thank you.
What action can she take? You are a creditor of the company. She does not work at the company, she cannot force you to work their. Does she just expect you to carry on working for the benefit of her shares?
If she absolutely refuses to sell and forfeiture is not an option the it may be a case of starting again. The other alternative is you could look to convert your debts into shares and dilute her down?
Do you have a shareholders agreement?
Kind regards
AJ
Customer: replied 1 year ago.

No we didn't make one. I wanted to do but the others didn't.

I gave her what she wanted for her shares and I know other people know that. Could I just tell my accountant to put hem into my name and make her take action to prove that she didn't ?

9 days ago I sent her an email saying that she has 15 days to pay the £24 for the shares, or she will forfeit them. Does it have to be from a solicitor ?

The email was dated and she replied that day, saying she believes I should have paid for them as I gave them to her.

Kind Regards

Dave

Expert:  Alex J. replied 1 year ago.
HiThank you.Can you tell me about how you gave the shares to her? Were they issued to her?When you gave her the office equipment did any one witness you agreeing that this was in exchange for the shares?Kind regardsAJ
Customer: replied 1 year ago.

Hi Alex

I know several people were aware that we had the deal had taken place. I'll ask tomorrow if anyone can confirm it.

My accountant will tell you the other information you need.

I really appreciate your help

Kind Regards

Dave

Customer: replied 1 year ago.

Hi Alex

Can I send you a PDF of the company articles ?

Regards

Dave

Expert:  Alex J. replied 1 year ago.
Hi Thank you. yes please if you have them available. Can you paste them into this thread? Kind regards AJ
Customer: replied 1 year ago.

Hi AJ

It wont let me copy and paste ?

         Dave



Customer: replied 1 year ago.
Expert:  Alex J. replied 1 year ago.
Thank you. I will review this and revert to you as soon as I can. Kind regards AJ
Expert:  Alex J. replied 1 year ago.
Hi, Thank you the articles do contain a forfeiture procedure. It is contained in Article 26-33. Can you confirm when you transferred the shares to her, did you allot them, did you send a form SH01 to companies house and did she send a letter applying for the shares?
Customer: replied 1 year ago.

Hi Alex

This is the reply from my accountant. it appears not ?

The shares were allotted to you all on the formation of the company. There has been an annual return done since then, confirming the shareholdings. That is all we have done!

Expert:  Alex J. replied 1 year ago.
Hi thank you. Ok so she was allotted the shares but did not pay for them. You can therefore make a call on them. Do you want me to describe the procedure detailed in the articles? Kind regards AJ
Customer: replied 1 year ago.

I did send her an email giving her 15 days to pay for them but it was just in an email. So yes please, I would like to know the correct way to deal with this .

Kind Regards

Dave

Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Starting with Article 26 the call notice must be:
- In writing;
- Must state when and how the call is paid;
- Which shares the call relates to; and
- Offer payment in installments.
If your email has not done this you will have to resend the notice.
Once the call has been made the this person will have 14 days to pay the call notice.
If the call notice is not paid, then the directors can forfeit the shares under Article 29. Notice of intended forfeiture must comply with Article 30 :
- Be in writing;
- Must require payment of the shares and any interest in 14 days;
- Must state how payment is made;
- Must state that if the notice is not complied with the shares will be forfeited.
If the shareholder still does not pay then then article 33 allows any director to execute an instrument for the transfer of the shares.
You need to double check before commencing this process that there were no conditions attached to the allotment of shares. Can your accountant confirm this?
Kind regards
AJ
Customer: replied 1 year ago.

Hi Alex

Can I send it by email or does it have to be by post ?

I sent her a message before but i didn't give her the chance to pay be installments....it's only £24

Regards

Dave

Expert:  Alex J. replied 1 year ago.
Hi
Thank you.
As you are trying to forfeit shares then you must follow the articles exactly - even if it is only £24 you must allow for payment in installments - you do not want anything to suggest the call is not valid.
You can only send the notice by email if she consented to service by email. I would send it to her home address just to be certain.
Kind regards
AJ
Customer: replied 1 year ago.

Thank you Alex.you have been very helpful.

This has cost me all of my money, I need to get out of this situation.

Thanks again

Expert:  Alex J. replied 1 year ago.
Hi, If I can assist any further please do not hesitate to contact. If you could rate my answer I would be most grateful. Kind regard AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3557
Experience: Solicitors 2 years plus PQE
Alex J. and 4 other Law Specialists are ready to help you
Customer: replied 1 year ago.

Hi Alex

Thank you for your assistance.

I did as you advised with the call for the shares, if I converted my loan into shares do I have to give her the option of doing the same ? If I do that and she refuses to put more money in, can I then dilute her shares ? I think this is what you said ?

Regards

Dave

Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
If you issue more shares then she will have pre emption rights. These can be avoided by special resolution.
Do you have enough support to pass a special resolution?
Kind regards
AJ

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