A situation where the majority 90% shareholder wants to sell the business but is concerned that the 10% shareholder will receive 10% of the sale proceeds and also entitled to 10% of the bank balance sat on the balance sheet.? (assuming that the buyer wants to purchase all the shares)
Is this correct regarding the minority shareholder's entitlement?
Thanks for any help
Replies (4)
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Eh?
If the buyer is buying the shares, each shareholder gets what he agrees with the buyer for his shareholding. The buyer may only want the 90% shareholding. Whatever happens in a share purchase, the bank balance remains in the company.
If the company is selling the business to the buyer, the proceeds are received by the company and the resulting total assets (basically, the existing bank balance plus the proceeds of the sale) will be divided 90/10 in a liquidation.
Check the articles
Have you checked the articles to see if there are any tag along rights? If so the minority shareholder would be entitled to force the purchase and equal price per share. If no tag along then it's up to the purchaser what he buys and what price he offers.
More clarity
If a buyer wants to buy the entire share capital of the company, he will need the 10% too. There is no automatic right of the 10% shareholder to get the same price per share as the 90% shareholder so the purchaser can offer what he likes and the 10% shareholder can refuse to sell. However there may be special terms written into the articles of the company which may include requiring the purchaser to buy the 10% or requiring the 10% shareholder to sell.
If the buyer is buying the business and not the company he will buy whatever assets he needs to run the business. He may also take on some or all of the liabilities. The purchase of the business would then put cash into the company's bank. What happens next is largely down to the 90% shareholder. He may decide to do nothing and just let the company sit there cash rich and dormant. Or invest the money in a new business. Or liquidate the company at which point the 10% shareholder would be entiled to 10% of the net assets of the company including the cash.