How to get rid of a 50% Shareholder
Discussion
Me and a partner were handed a ready made business as part of negotiations with our ex employer, we went into it as 50/50 shareholders without any kind of shareholder agreement!! None of us had to invest any money as the customers who transferred to our new company were already under contracts that were pro rata transferred to our new company.
We were both Directors of the new company, but after 12 months the partner decided it wasn't for him and resigned as director and left the business.
After our first years accounts were drawn up he was offered an amount to release his shares which he blankly refused to sell or negotiate over.
How can I get this dead weight out of the business as cheaply as possible??
During his time as Director he did absolutely nothing relating to his role as director and just acted as an engineer. I did absolutely everything from establishing the company through to day to day running of the business as well as acting as a second engineer for the business.
Any advice greatly recieved?
We were both Directors of the new company, but after 12 months the partner decided it wasn't for him and resigned as director and left the business.
After our first years accounts were drawn up he was offered an amount to release his shares which he blankly refused to sell or negotiate over.
How can I get this dead weight out of the business as cheaply as possible??
During his time as Director he did absolutely nothing relating to his role as director and just acted as an engineer. I did absolutely everything from establishing the company through to day to day running of the business as well as acting as a second engineer for the business.
Any advice greatly recieved?
The cleanest way is probably to start again without him.
But if he doesn't want to negotiate there isn't a lot you can do without going into dispute.
Maybe ask for an investment to expand the business and when he says no dilute him to such an extent that his remaning shares are immaterial.
Either way if the business has any worth you should take advice as it could get messy if you get it wrong.
But if he doesn't want to negotiate there isn't a lot you can do without going into dispute.
Maybe ask for an investment to expand the business and when he says no dilute him to such an extent that his remaning shares are immaterial.
Either way if the business has any worth you should take advice as it could get messy if you get it wrong.
He probably realises that he is onto a nice earner with you doing all the work and him doing squat, yet still yielding 50% of the profit - what incentive is there for him to sell?
To solve this - are your customers loyal to you personally? Do they know him/interact with him?
If they are, and he won't sell up, wind the current business up, start a new company with you as sole share-holder and take your customers with you.
To solve this - are your customers loyal to you personally? Do they know him/interact with him?
If they are, and he won't sell up, wind the current business up, start a new company with you as sole share-holder and take your customers with you.
Made him a fair offer when the accounts were produced according to our accountants valuation of the company, he insisted on quadruple that amount then blankly refused to enter into any form of negotiations.
We have threatened to dilute his shares but it seems he has legal protection against that so thats a no go.
Can anyone recommend who to go to for professional advice ie an insolvency practitioner?
We have threatened to dilute his shares but it seems he has legal protection against that so thats a no go.
Can anyone recommend who to go to for professional advice ie an insolvency practitioner?
I think the customers will be loyal to me as they currently have no interaction with him.
Are there any legalities in moving customers and will I still need to wind up the old company?
Could I transfer all the business away and then gift him my shares in the old company forcing him to wind it up?
Are there any legalities in moving customers and will I still need to wind up the old company?
Could I transfer all the business away and then gift him my shares in the old company forcing him to wind it up?
I think (but could be wrong) that you need a majority (or even 75%?) of shareholder votes to wind a company up. So that might not be as simple as it appears?
I also think it is illegal to run the company in a way that disadvantages one (equal) shareholder. Could be wrong on this too though.
I have a feeling you might need proper advise on this one......
I also think it is illegal to run the company in a way that disadvantages one (equal) shareholder. Could be wrong on this too though.
I have a feeling you might need proper advise on this one......
You suggested he has resigned as a director (therefore just a shareholder now).
In that case, pay yourself a bonus/ wage rise (not dividends) it might smart on the paye tax front but there is nothing he can do about it.
The company makes a whole lot less profit and he might come to his senses around valuation.
In that case, pay yourself a bonus/ wage rise (not dividends) it might smart on the paye tax front but there is nothing he can do about it.
The company makes a whole lot less profit and he might come to his senses around valuation.
lol it does smart paying tax but would rather give it away than him get any dividends.
My accountant has already suggested giving myself a big bonus and then investing that money back into the business asking him to invest an equal value as a 50% shareholder in a proposed "Grow the Business" investment scenario
My accountant has already suggested giving myself a big bonus and then investing that money back into the business asking him to invest an equal value as a 50% shareholder in a proposed "Grow the Business" investment scenario
As I see it I have two options
1. Start a new company and move customers to it. Not sure of the legalities of transferring but could just do it gradually on contract renewals, this may take up to 12 months to complete
2. Hold out taking as much out of the business as possible as salary and bonus and hope he sees sense.
If anyone knows a professional or has used anybody in the past please let me know?
1. Start a new company and move customers to it. Not sure of the legalities of transferring but could just do it gradually on contract renewals, this may take up to 12 months to complete
2. Hold out taking as much out of the business as possible as salary and bonus and hope he sees sense.
If anyone knows a professional or has used anybody in the past please let me know?
Gassing Station | Business | Top of Page | What's New | My Stuff