What are the rights of a 50% owner of a business???
Discussion
Hi,
Was wondering if someone in the know could explain to me about shares in a small business.
If the business is something like a small cafe, and the shares are owned by say Adam and Eve, each owning 50% (50 ORD £1), if for some reason Adam wanted to leave, could he sell his shares to someone who was willing to offer him the right price or are there any legalities which will protect Eve meaning that Adam will need to offer these shares to Eve first.
(OR)
If Adam and Eve are owners of the business but they both had their conflicts. Say Adam was the good guy boss who gave employees free food, let them start late and leave early, and generally do as they pleased and these actions were effecting the business but Eve was was the hard working, tough and ruthless entrepreneur, what power does Eve have in changing the way this business is run. Also, whats normally done to resolve these types of conflicts in bsuiness.
Was wondering if someone in the know could explain to me about shares in a small business.
If the business is something like a small cafe, and the shares are owned by say Adam and Eve, each owning 50% (50 ORD £1), if for some reason Adam wanted to leave, could he sell his shares to someone who was willing to offer him the right price or are there any legalities which will protect Eve meaning that Adam will need to offer these shares to Eve first.
(OR)
If Adam and Eve are owners of the business but they both had their conflicts. Say Adam was the good guy boss who gave employees free food, let them start late and leave early, and generally do as they pleased and these actions were effecting the business but Eve was was the hard working, tough and ruthless entrepreneur, what power does Eve have in changing the way this business is run. Also, whats normally done to resolve these types of conflicts in bsuiness.
It will depend on what the articles of association of the company state, i.e. the internal constitution. It will also depend on whether there are any shareholder agreements in place. The basic position, without having the Companies Act 1985 to hand is that the shareholder is free to transfer their shares to anyone they wish to.
To answer the second point, there are a number of remedies for a shareholder where the conduct of another shareholder is sufficiently bad. However, where the conflict is down to legitimate business decisions I would hazard a guess that it would be pretty messy and the only remedy may be to sell your shares.
To answer the second point, there are a number of remedies for a shareholder where the conduct of another shareholder is sufficiently bad. However, where the conflict is down to legitimate business decisions I would hazard a guess that it would be pretty messy and the only remedy may be to sell your shares.
We have a 50:50 share split in our business which is potentially a problem. So far all disagreements have been settled amicably but at the outset we both realized that that may not always be the case. Our remedy was to draft an agreement appointing a named, independent arbitrator to whom, in the event of fundamental disagreement, we can each present our case and whose decision will be binding on both parties. The arbitrator is someone who both shareholders trust and who is willing to accept the responsibility.
Alternatively, at each minuted meeting there should be a Chairman appointed and convention suggests that the Chairmen gets the casting vote in the event of a split decision. I haven't had to use that tactic yet so don't know how well it will be received!
Alternatively, at each minuted meeting there should be a Chairman appointed and convention suggests that the Chairmen gets the casting vote in the event of a split decision. I haven't had to use that tactic yet so don't know how well it will be received!
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