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Ash, Solicitor
Category: Law
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Experience:  Solicitor with 5+ years experience
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Own a limited company with another director. we own 50%

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Hi, own a limited company with another director. we own 50% each. we operate a franchise which is due to be renewed in 12 months time. We also have a lease on office space which is also is renewable in 12 months time. The time has come for me split the limited company as i no longer want a business partner. However, if i offer to buy him out and he says no, apart from resigning my position (but this leaves him the limited company and the right to renew both lease and franchise), what can i do? The reason for the split is that he is often not in the office and takes no interest in the running/financials of the business but is happy to take the salary/dividends. i have spoken to him many times in the past, things get better for a bit than back to usual?
many thanks
Hello my name is ***** ***** I will help you.
Do you have a shareholder or Directors agreement please?
Customer: replied 2 years ago.
Hi, i have a heads of agreement?
What does that say about leaving etc?
Customer: replied 2 years ago.
1. The business shall be carried on ator such other place or places that the Directors shall from time to time agree within the specified area. 2. The lease of the said premises shall be held by trading as whose registered office is 3. The capital of Limited trading as shall be 100 shares divided as to 50 to "Director " & 50 to "Director & Secretary". 4. Each shareholder may at any time personally or by agent inspect the books of the business and examine into the state and prospects of the business and advise on such matters. 5. The "Director" and "Director & Secreatry" shall be paid a salary equal to £ per annum which shall be drawn monthly on the last day of each month. 6. The profits and losses of the business shall belong in the following proportions: "Director" 50% and "Director & Secretary" 50% provided that: (i) Prior to calculation of profit a sum equal to £25,000 (per branch) shall be retained at each year end (or a reasonable sum decided by joint decision of both "Director" & "Director & Secretary"). (ii) If any profit or loss account of the partnership shall show that any individual has made any               excess drawings for the period of that account and shall repay the excess immediately. (iii)   The "Director" and "Director & Secretary" shall not be entitled to make any drawing onaccount of their share or profits other than agreed dividends. 7. If either party should wish to sell his shares in the business then the other shall individually have the first opportunity of purchasing the total shareholding of the executive shareholder in . Such option shall be exercisable by a notice given in writing to each of the shareholders.     8. If the business requires additional capital it shall be contributed in equal 50% proportions by both "Director" & "Director & Secretary". 9. Proper books of account shall be kept promptly and such books shall be available at all times for inspection by the shareholders. A profit and loss account shall be taken every trading year end and a balance sheet shall be signed by "Director" & "Director & Secretary" and shall then become binding on them except that any shareholder shall be entitled to require the rectification of any manifest error discovered in any such account or balance sheet within six months of the date when it was signed. 10. The bankers of the business shall be Barclays Bank or such other bankers as from time to time shall be agreed. All money not required for current expenses and all cheques shall be paid promptly into the bank account and all securities for money shall be promptly deposited in the name of the business with the bankers. All cheques on the bank account shall be drawn in the name of the business and may only be drawn on the signature of "Director" & "Director & Secretary".  All purchases over £750 must be jointly agreed by "Director" and "Director & Secretary" prior to their purchase. All purchases must be wholly for the benefit of and in the best interests of the business. 11. Any Shareholder shall not be entitled to assign mortgage or encumber his share without consent of both parties in writing. 12. "Director " & "Directro & Secretary" shall be just and faithful to each other and shall devote his best efforts and whole time and attention to the business. 12.1) "Director" & "Director & Secretary" shall be entitled to take four weeks holiday each year at the time agreed by the other provided always that the best interests of the business are considered before any such leave is granted. 12.2) "Director" or "Director & Secretary" shall not without consent of the other:          Engage or dismiss any other employee or          Become guarantor for any other person or          Lend any business money or property or          Release any debt due to the business orDraw accept or indorse any cheque or other bill of exchange or give any security orpromise for the payment of money 13) If by reason of illness, accident or other cause either the "Director" or "Director & Secretary" shall be incapacitated from attending to his duties for an aggregate of 182 days in any period of 365 days the other may give four weeks notice of intention to terminate the business as to the incapacitated party. 14) All matters relating to the management and conduct of the affairs of the business shall be decided by unanimous decision made by "Director" and "Director & Secretary". 15) Meetings shall be held monthly during the first week of each month. It is hereby agreed that no majority of shareholders will oust a minority shareholder unless exceptional circumstances of gross misconduct have arisen. Questions of gross misconduct may be
Customer: replied 2 years ago.
ecided by unanimous decision made by "Director" and "Director & Secretary". 15) Meetings shall be held monthly during the first week of each month. It is hereby agreed that no majority of shareholders will oust a minority shareholder unless exceptional circumstances of gross misconduct have arisen. Questions of gross misconduct may be referred to arbitration under clause 16. 16) If at any time any dispute or difference or question shall arise between the parties about the business or matters of alleged misconduct then the same will be referred to an arbitrator to be nominated on the request of any party by the president for the time being of the institute of  Arbitrators and according to the provisions of the Arbitration Acts 1950 and 1979 and the decision of the Arbitrator shall be final and binding. 17) The shareholders hereby jointly and severally covenant not to solicit customers or set up an agency in competition with the business for a period of two years after the sale or disposal of their shareholding within a radius of 2.5 miles the business premise (or within a radius of 5 miles of each and every new business premises) or to use the firm name or hold themselves out as binding the business. The shareholders also agree not to engage in or set up another estate agency at all whilst in possession of shares in Limited trading as without prior consent of the other shareholder(s).    18) An annual budget must be prepared each year for each office and is to be approved by both "Director " & "Director & Secretary" .
One of you has to buy the other out. There is no option. You can resign and remain a shareholder, that is an option for you.
But you can't make him buy you and he can't make you buy him. If the agreement had been worded in such a way to reflect what would happen in this case then you would be ok, but it does not.
All you can do is offer to sell or be bought out and if that does not work, you can resign as a Director. That is sadly all you can do.
Can I clarify anything for you about this today please?
Customer: replied 2 years ago.
Hi, thanks for the swift reply. What happens tho if the buy out price is too high. He is on to a good thing as he doesn't contribute much to the running of the business but is happy to take the money. So I feel he will be stubborn and sit tight. I don't want to resign as it's me that has built the business up? We have 1 debt in the form of a loan to barclays. We have business going thru of 120k. Can I wind the company up legally even if he doesn't want to?
There isnt a formula specified in the agreement, ideally it would say you get an accountants valuation. You should probably do that, pick one which is independent which can give a fair price.
You cant wind the company up, unless its trading insolvent etc.
Does that help?
Customer: replied 2 years ago.
Thanks. We will get a valuation. Again my concern is he will want a silly price knowing it's not worth that. Then we are stuck. If our bank account on a particular day is in debt and we have a loan of 20k, altho we will have other monies coming in could we go down the insolvency route?
You would need to speak to an Insolvency Practioner about that, I can only tell you what your legal options are. But in short if your assets are more than your liabilities then no.
Does that help?
Customer: replied 2 years ago.
I think so. Let's see how my business partner reacts after the weekend to let it all sink in. Many thanks for your help. Have a good weekend.
Good luck and have a good one too.
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