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Company owners dispute question

Who can close a business down ?

Hello All - new here so any answers much appreciated. This is a delicate situation so I would prefer to remain anonymous.

I am a 50% shareholder and managing director of a small limited company. There is one other director who does not work in the business and has no shareholding. There is also one other shareholder with 50% shareholding who also does not work in the business.

Due to a breakdown in the business relationship, I want to close the business down, the others want to keep it open. The business has no debts but is just keeping it's head above water. Can I take the decision to close the company ?

Jack

 

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07th Mar 2019 09:01

No.

You need to sell your shares.

In the meantime, you have no obligation to work for the company. Get yourself another job and tell them you're leaving. This may precipitate matters.

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to lionofludesch
07th Mar 2019 09:28

Thanks for the reply Lion .
The shares are pretty much worthless as the business will fold without me there so I'm happy to walk away. I run the whole thing including the finances - we will have a small corporation tax liability due for the year ending in 2019 which will be payable 9 months later . There is sufficient cash to pay this . My concern about resigning now is that the others will then have control of the finances and decide to take the remaining cash and let the business go bust - implications being I become associated with a bankrupt company ?

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By Jdopus
to justjack
08th Mar 2019 11:04

If you have concerns about this and the cash is there you could pay the tax bill early Jack? Not sure how your colleagues would look on this but from your point of view it may be preferable to the business being made insolvent for non-payment of liabilities as you'll be the one asked about this by the insolvency service.

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07th Mar 2019 09:20

And is there a shareholders agreement?

I guess not otherwise you wouldn't be asking but have to check

And does your contract as director have any restrictions on what you can do (eg who you can work for afterwards etc)

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07th Mar 2019 09:31

It was formed as an off the shelf company with standard memo and articles, there are no restrictions in place or bespoke shareholder agreements

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07th Mar 2019 10:15

1. sell your shares & walk away, or

2. Get another job, declare a dividend to clear out remaining cash (allowing for debts to be paid), then resign. You’ll need approval from the other director to declare the dividend.

3. Without know the specifics, might it be possible for you to get another job but retain control of the finances? Then advise the others that you don’t want to do work in the company anymore and see what happens.

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to atleastisoundknowledgable...
07th Mar 2019 10:38

Hi - Yes, that's possible, I could resign as director, leave my paid employment but still retain my 50% shares - wait for the final tax bill then split anything remaining.

Thanks for your help.

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to justjack
07th Mar 2019 10:49

Hopefully, when it clicks with others what the consequences of your threat to resign would be they will cave in anyway.

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07th Mar 2019 11:13

Who is on the bank mandate - does it require more than 1 signature??

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By philrob
07th Mar 2019 14:14

I would urge you to have a conversation with a liquidator who will be able to advise you on the possible processes to follow and other options that you may not have thought of before you start to do anything.

Solvent liquidations (winding the company up with ALL of the creditors paid in full and the balance returned to shareholders) has very different consequences for Directors than companies going bust owing money.

If I remember correctly, it is the shareholders who decide to appoint liquidators/wind the company up in a solvent situation.

You will have three hats in this - employee (possibly entitled to redundancy depending on your service contract and other factors), Director and Shareholder. The different hats have different responsibilities - some of them with legal/personal consequences if you get them wrong and creditors go unpaid.

If the shareholders can't agree to wind the company up, then you will need legal advice on protecting your (Director hat) position, particularly if you have worries that debts might not be paid in full if you left.

One other option that I have heard of is using a mutually agreeable third party to mediate between shareholders and agree share sale/purchase framework ultimately leading to shareholder A and shareholder B writing what they thought the value of their shares in the business. The person who had the higher value then purchased the shares from the shareholder with the lower value at the (lower) priced asked. The person paying is getting a bargain (by their valuation) and the person selling their shares got 'fair value' (again, according to their valuation).

A liquidator (esp for voluntary liquidation) is best found by recommendation (ask your accountant or the accountants of businesses friends for recommendations). In my experience initial brief meetings are free of charge and the liquidation itself (if you proceed) may be quoted on a fixed fee (or capped) basis.

Good Luck.

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to philrob
08th Mar 2019 11:20

It really depends on the circumstances. OP says the Company has no debts so if we assume it is solvent a solvent Lqn (MVL) would only apply if there are assets of over £25k.

If it is insolvent then a voluntary Liquidation (CVL) would apply but if the Shareholders won't play ball then the only option is a Compulsory Liquidation through the Court.

If the debts call all be settled in full the it would seem dissolution might be the answer.

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07th Mar 2019 14:57

Is the situation by any chance in fact that you have a personal service company and a (soon to be ex) wife who owns 50% of the share capital?

I only ask because that's often the situation that gives rise to the type of question you're asking and knowing that would perhaps change the answers you're being given.

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