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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3844
Experience:  Solicitors 2 years plus PQE
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This question relates to the proposed selling of shares in

Customer Question

This question relates to the proposed selling of shares in a private limited company held by husband and wife who are separated and entering divorce proceedings.
The wife claims 75% of shares are hers to sell and she is the majority shareholder. The history of the shares is that 4 equal shareholders owned the company until Oct 1996. In Oct 96 the other 2 shareholders sold out to my wife and I. The documents were prepared by a legal firm but no note was made of the actual payment for the shares at the time of transfer. During the hand over meeting I paid the outgoing shareholders the |£1 nominal sum in cash. However the transfer states clearly that ownership is to my wife. as a newly married couple getting rid of corrupt directors the name on the share transfer certificate seemed irrelevant! Throughout the period Oct 96 - Dec 12 I was an active member and full time employee of the company. For the entire period of 96-12 all dividends have been paid out on a 50/50 basis giving me the beneficial interest in 50% of the shares. The company derives income from 3 different areas:
1 Public Relations Activity
2 Subletting office space
3 residential rental income from wholly owned flats

During mediation my wife refused to attribute anything other than £0 to the value of the PR activity. This valuation was not resolved because mediation failed when my wife appointed the an old friend (an accountant) as both her mediation partner and the companies freelance FD. The clear conflict of interest stopped mediation dead.

18 years later and we are in (acrimonious) dispute. The PR activity of the company has not done well since Dec 12 (not least because she is always on holiday) 8 foreign holidays since Aug 12 alone and business trips to Australia. She has called a board meeting today 21st Jan giving 6 days notice and stated her intention to give away the Public relations activity the company undertakes (not the asset value of the company so freehold property wholly owned and cash at bank would not transfer) company to another company in return for a guranteed salary.

Divorce Forms E are due in as of yesterday (neither has been submitted yet - My wife's because she intends to trade shareholder value for a higher salary). The move on her part is clearly an attempt to create zero value of the PR activity.

Her ownership of the shares is questioned because I (the husband) paid for the 50% of shares to be transferred and not her.

The PR side of the company was valued by 3 competitors who wished to buy it in 2012 so external valuations are clear with all relevant multipliers calculable.

The questions are:
1 Can she call a board meeting and vote to give away the PR company
2 If ownership of the shares is in dispute what actions can be taken to prevent a sale
3 What liability does her friend the accountant encounter where such a disposal is not in the best interests of the shareholders. No attempt to put the company up for sale with a broker has been made.
Submitted: 4 years ago.
Category: Law
Expert:  Alex J. replied 4 years ago.

Thank you for your question and welcome.

My name is AJ and I will assist you.

I can answer your question from a company law perspective only. I have also assumed you do not have a shareholders agreement:
1. Technically no she cannot do this, this would potentially be classed as a "Substantial property transaction" under s.190 of the Companies Act 2006. As she is disposing of a non cash asset for personal gain it must be approved by a special resolution of the company. Also as you are on paper the minority shareholder her actions are potentially unfairly prejudicial and you may have a claim against her for under S.994 of the Companies Act 2006 for unfair prejudice. If you can prove you are beneficial owner of half the shares you may be able to force her to buy them off you at a fair market value;

2. You could seek an injunction from the High Court on the grounds of unfair prejudice under S.994.

3.I am afraid in this circumstance he is acting on the instructions of the director. You would have to prove the accountant was knowingly disregarding your interest with an intent to defraud you.

I look forward to hearing from you.

Kind regards