Ltd company with 2 directors -what if there not getting on ?

[autofocus]

Hi there,

I work as Operations Manager for a small company that was incorporated in Sept 2006. The company is equally owned by two directors who keep falling out and really don't get on any more. It won't be long before it starts to damage the company and one of the directors has asked me for my thoughts. Director A (whom I get on with really well) really wants to carry on with the business, Director B has lost all heart and might be looking for a way out.
From memory there were 1000 shares issued in the company at incorporation and they both own 500 shares each.
The company has a turnover of approx £2.5 - £3 million and has no real assets, it owes about £250,000 across all its creditors (inc H.M.Revenue & Customs etc)

Director A doesn't want to rip Director B off so what are the options ?

Can Director A buy the shares from Director B, if so how is the price set ? is it based on profit ?

Any other advice would be greatly appreciated ??

Regards

Tim

[JustinP1]

IMHO you should decline to comment on any of it.

Stuff like this often gets nasty, and you don't want to be on the wrong side.

There is a couple of ways they can do this, they could both bid 'auction style' with their solicitors, however if one director wants out, then the best way to do it is just sit down man to man and ask the guy who wants out when he wants and thrash out a deal.

Remember sales of shares are not dealt in the same way for taxation purposes as wages, you pay a lot less tax. Therefore a settlement is worth a lot more after the taxman gets paid.

[Bushmaster]

Surely they should go to the nearest Starbucks and talk it over.

[christmc]

anonymous said:

[redacted]

If he has been removed as a director and has not been involved in the running of the business for 2 years or made his shares could be changed to class b which in effect could make him a minority shareholder and therefore his shares worth considerably less.

Its very risky trying to show a company making no profit if it is, because the other shareholder will eventually find out.

Plus no bank manager or financers like to see a dormant major shareholder because any financial or commercial decisions can be made without his/her consent.

So if a director wants to leave or should leave for whatever reason, he needs to do it very very quickly if the business is to survive imho.

[BigAlinEmbra]

Hitman seems the most obvious option. Suggest this to the director you like most, and ensure he knows you have a "safety blanket" in case the feeling isn't mutual.
(Or the other director finds out).

[thisislife]

Haha the hitman or more favourable "the breaks on the car just went".

In all seriousness, be and man about it and go down Starbucks to do a deal. Similar thing happened to me last year and we just sat down in a bar for a couple of hours went over everything and ended up shaking hands with an agreed price.

We are still on talking terms now and there are no hard feelings at all.

It's best not to let emotions get in the way of making "business decisions". With regards to director A asking you for advice I would be very careful here. It really is up to Director A to make the decision him/her self and speak to Director B.

[monthefish]

Is there not a scheme (I think Bannatynes book mentions it) where disputes such as this are settled, whereby (in the case) Director B writes down what the minimum amount he would accept to be bought out, and Director A is then obliged to pay that amount.



(sorry if the above is complete nonsense, but hopefully someone more knowledgeable will know what I'm talking about and clarify the finer points of the process)

[baxster]

1) Agree a value of the shares and pay him.
2) Cease the company, collect its debtors pay its creditors and distribute the surplus. Then recomence as new co.

[PhilLL]

monthefish said:

Is there not a scheme (I think Bannatynes book mentions it) where disputes such as this are settled, whereby (in the case) Director B writes down what the minimum amount he would accept to be bought out, and Director A is then obliged to pay that amount.



(sorry if the above is complete nonsense, but hopefully someone more knowledgeable will know what I'm talking about and clarify the finer points of the process)

I believe this involves both parties submitting sealed bids for the other's shares, with the highest bidder legally obligated to buy the other out at that price.

Seems a very fair way of settling such a dispute.

[monthefish]

PhilLL said:

monthefish said:

Is there not a scheme (I think Bannatynes book mentions it) where disputes such as this are settled, whereby (in the case) Director B writes down what the minimum amount he would accept to be bought out, and Director A is then obliged to pay that amount.



(sorry if the above is complete nonsense, but hopefully someone more knowledgeable will know what I'm talking about and clarify the finer points of the process)

I believe this involves both parties submitting sealed bids for the other's shares, with the highest bidder legally obligated to buy the other out at that price.

Seems a very fair way of settling such a dispute.

That sounds more like it. Ta.

[DavidY]

There are tax issues if a 'fair and market' value is not paid for the shares. I've been in this situation a couple of times:-

1) Fired an 15% holding director, had to pay 'accountants assessment of market value' of his share value to him.

2) Split with a 50/50 director, he paid me a 'fair and market' value for the company

Best couse of action in my view if you are in this situation, personally employ an accountant (not your usual business accountant) to assess a 'fair and market' value, then you know if you want to be bought out or to buy out. Unfortunately 50/50 companies can get themselves into serious difficulties when this situation arises and I have seen companies go bust trying to split!

In a nutshell, get some professional advice and stay on talikng terms fo it can all be sorted out.

davidy

[srebbe64]

Get the two to talk about how they feel - with honesty. Would recomend beer not coffee. Failing that a mediation company could be used - there are some very good ones around.