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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3840
Experience:  Solicitors 2 years plus PQE
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I just bought 50% of a company and I'm a on the board of

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I just bought 50% of a company and I'm a on the board of directors.
There are another two directors who own 25% each.
We have a shareholders agreement but there are no clauses for disputes or any other form of arbitration.
I would like to remove one director and also purchase his shares due to him simply doing nothing.
I understand being a director and shareholder are two different things.
What can I do here?
If the short answer is nothing aside from trying to buy him out politely what about extreme measures such as selling the company (bear in mind there's no tag along clause for that in the shareholders agreement).

Hi thank you for your question and welcome. My name is ***** ***** I will assist you. Does the company have any assets and debentures over its assets? Do you have support of the other director/shareholder? Are all the shares fully paid? Kind regards AJ

Customer: replied 1 year ago.
1. Assume no real assets, just a name trademark and a few small pieces of kit worth less than £1,0002. I have support over director 2 who owns 25%3. I put money into the company to buy the shares. I haven't received anything back

Hi thank you. How much did you invest? was any of it by way of a loan? I will write a response but this wil take me a little while - I will post my response by tomorrow. I look forward to hearing from you in the mean time. Kind regards AJ

Customer: replied 1 year ago.
163;9,000 for 50%The reason was to pay off / buy out an existing shareholder (unofficial) and reduce the % of the other two directors.The company was setup with director A and B owning 50% each.They had a 3rd unofficial partner and always split the money / profits 3 ways.That partner had to leave due to ill health so I put £9k into the firms bank account.I was told this would give the partner an exit payment and them money to reduce their shareholding down to 25% each.I am aware I can call a shareholders meeting and providing I have 75% of the vote (which I can get) then I can pass a motion to enter a "tag along agreement" for selling / liquidating the firm.I then move to sell the firm to a new company I own and get rid of the director. It may be prejudice though and could allow for legal action.This is why I'm curious if there is any other way that negotiation.

Hi, Thank you. You have proposed one of the main strategies I was going to suggest. The only other action I would consider:

(i) You resign, treat your money as a loan and try and sue for it;

(ii) You issue more shares in the company and dilute down the other shareholder - you can do this as with 75% you can disapply pre emption rights - the only problem is you risk the unlikely scenario of an unfair prejudice claim (S.994 of the Companies Act 2006)

(iii) If the shareholders shares are unpaid make a call on the shares?

(iv) Look at other contractual provisions in the shareholders agreement? Is this shareholder acting in the best interests of the company?

I look forward to hearing from you. Kind regards AJ

Customer: replied 1 year ago.
Hi AJ,The agreement is attached for your perusal.

Thank you. I will review this and revert to you as soon as possible. Kind regards AJ

Hi, Would the dissenting shareholder be prepared to sell at the right price? Kind regards AJ

Customer: replied 1 year ago.
i have no idea, probably not knowing him.

Hi, Thank you. The agreement does contain a mechanism for independently valuing shares if he wanted to sell. Assuming the company needs finance to go forward you could try and pressure him into selling. You could say that if he does not sell the shares you will consider adding additional capital to the company by issuing more shares and as a result diluting him down. Again this would require the support of the other shareholder. Kind regards AJ

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