Minority shareholder dispute
I own 35% of a small private limited company and am involved in a dispute with my former partners. As is often the case we did not have a shareholders agreement, however the Articles do allow for shareholder preemption at a 'fair value' for up to 21 days from the shares being offered.
Our dispute started over a year ago when I was fired and subsequently removed as a Director. I petitioned for and won a case for unfair dismissal and am now seeking to realise the value of my shares. I commissioned a valuation of the company which the shareholders have informally dismissed but to date no alternative has been offered by them.
Obviously this is a complex case in which I should seek professional help. However funding the cost of my unfair dismissal case, for which I only recouped a small percentage of the outlay, has left me without adequate funds to pursue another expensive litigation so I am hoping to get a heads up before I embark on spending more money.
I am in now in discussion with one former partner and have proposed to him that the other shareholders buy my shares, I buy theirs or we sell the company intact to an interested third party. To date the company has only responded that they 'have no money' and have not proposed a valuation or even a method of resolving this dispute.
Can anyone tell me what my rights are with regard to forcing a valuation of the company or the purchase/sale of shares, what pitfalls I need to be aware of and what my worst case scenario is likely to be?
Thank you in advance for your help.
Articles
You need to get hold of a copy of the company's Articles of Association and see what rules they set out. If you do not have them you can get them from Companies House.
The problem that yo uwill have is that if the current directors do not follow those rules you will need to incur further legal costs to (try and) make them do so.
Your valuation will give you some idea of whether the matter is worth pursuing but remember that controlling directors can reduce the value of a company quite legally by, for example, paying salaries and bonuses to themselves.
good luck
difficult
all of which unfortuntately illustrates why in this sort of company shareholders agreements are essential to unravel such cases.
Basically you cannot force the issue and can only wait until they take the initiative.You do however have an advantage in sofar as you could make things very awkward for them and I would usually advise that it is in their interest as much as yours to resolve this. Not least there is the issue of future dividends and 35% is big enough to want out ASAP.
If they do not respond (as may happen) consider a solcitors letter to them although again that would really be appealing to their better nature.You do of course have minority interest protection under the companies acts however that is a can of worms.
You asked for the worst case scenario.This is that they form a new company and hive the business into it leaving the company as a worthless shell and your 35% valued similarly.Again theoretically there is protection against such action but again potentially very costly.
good luck
pembo