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F E Smith
F E Smith, Advocate
Category: Law
Satisfied Customers: 8547
Experience:  I have been practising for 30 years.
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I own 60% of shares in a limited company. The other

Customer Question

I own 60% of shares in a limited company. The other shareholder has died owning 40% of the shares and his wife now wants to sell them to the business she does not have anything to do with the business. I do not want to buy these shares so I would like to know if I am legally bound to buy them?
Submitted: 4 months ago.
Category: Law
Expert:  F E Smith replied 4 months ago.

A co-owner in a business may have the right of first refusal (normally the case) in the company’s Memorandum and Articles but it would be very unusual for the remaining shareholder to be compelled to buy them.

The shareholder wishing to sell is then in the situation of having to find a buyer on the open market which, for a private limited company may not be particularly easy.

Unlike a listed company, the shares in a small private company will sell for as much as someone wants to pay and what the seller wants to sell them for. There is no set formula for valuation although obviously the buying price and selling price and how much each party is willing to sell/buy for will be based upon the value of the company. However, it doesn’t matter what the company is worth, if nobody actually wants to buy those shares.

The disadvantage of you not buying them is that you could end up being in business with another shareholder that you don’t want to be in business with.

Can I clarify anything else for you?

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Best wishes.

FES.

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