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Lost contact with shareholder

Lost contact with shareholder

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A client has received an offer from a competitor to buy them out, only on the basis that they receive 100% of the shares. The company has lost track of a minority shareholder, hasn't been in touch for many years, and old phone numbers/email not recognised, and no answer to mail sent to old address, doesn't appear to be on Social Media. The value of the buyout to the shareholder is £200. Ordinary 1 shares. Nothing in shareholder agreement allow majority shareholder to force sale of minority shares. Is there a way of including their shares, without their express permission? Are there specified legal steps which have to be carried out, and once done, it is possible to go ahead (not sure that sentence makes sense!).

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05th Jun 2019 13:47

I think this may be one for a solicitor to answer.

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05th Jun 2019 13:49

What is the minority shareholder’s percentage interest? Isn’t there something in the Companies Act that forces a small minority shareholder to accept an offer that the other shareholders have accepted?

The above is just a start. Either way, the advice the company needs on how to deal with this is legal advice.

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05th Jun 2019 14:50

Push the question back to the buyer. Explain and ask them how they would like to proceed.

Alternatively, do they need to buy the company? Could they buy assets and undertaking? The company could then distribute the proceeds in whatever form they choose.

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to paul.benny
05th Jun 2019 15:52

Thanks, the company needs to be seen to continue, due to some of it's contracts (Govt contracts - it would cause problems to move them to a different company).

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05th Jun 2019 16:01

If all parties are keen to strictly observe the legal niceties here the deal will most likely fall through or the ice caps melt before any agreement is reached.

Could they investigate the possibility of some sort of warranty if the shareholder ever becomes known?

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to Roland195
05th Jun 2019 16:49

You are not answering my question about what percentage of the shares the missing shareholder owns. If 10% or less S979 CA 2006 is probably your friend. As a complete non lawyer, I observe that that seems to remove the need for the missing shareholder to consent, which must help.

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to johngroganjga
06th Jun 2019 06:20

Sorry, he owns 2% of the shares. Thanks, thought that only applied if it was written into the shareholders agreement, but will re-visit.

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to dylanski
06th Jun 2019 10:22

Then look at the section of the Companies Act I referred you too, and then advise the company to take legal advice on how a transfer of the missing shareholder’s shares can be executed in his absence. If I am right that that section removes his right to decide to keep them the whole situation must become a lot easier.

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to johngroganjga
06th Jun 2019 10:24

Thank you John

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to johngroganjga
06th Jun 2019 11:07

S.979 CA 2006 is found within Part 28 of the Act. Part 28 deals with takeovers and mergers. I could be wrong but I believe that Part 28 is for companies that have voting shares admitted to trading on a regulated market.

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to RMorrison
06th Jun 2019 13:18

You may well be right.

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to RMorrison
06th Jun 2019 13:19

Thank you

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05th Jun 2019 16:19

I have seen notices placed in newspapers by solicitors looking for people. Usually beneficiaries of wills but I have seen for other reasons.
With something such as this there doesnt appear to be anything in Companies Act/law and as Lesley says - its one for a solicitor.
That way you can prove that you are doing all you can to find the person.

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06th Jun 2019 11:05

Is it worth it? If the total share proceeds are £10,000, the costs are going to exceed that long before this is sorted I suspect. Unless there are shareholder (or director & shareholder) loans being repaid as part of the deal.

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to paulwakefield1
06th Jun 2019 13:21

Thanks, I agree it's not a big amount, although the major shareholder will be glad of the money. I was really just asking to see if anyone knew whether we could go ahead on the presumption of agreement, if there was no specific agreement, but obviously there is no easy fix, so we will consider alternatives.

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to dylanski
06th Jun 2019 14:10

You seem to be ignoring everyone’s suggestions for the client to take legal advice on the point. You seem to have decided that “there is no easy fix” without taking the trouble to find out.

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to johngroganjga
06th Jun 2019 14:41

Hi John, not ignoring anyone's comments, just, given the small amounts involved (as mentioned by 1 poster), we would like to explore easy (and cost effective solutions) first, is that not what this forum is for, giving and receiving advice, and the beneficiary acting, or not, on it? Having received the suggestions, we will now proceed with taking legal advice. To turn it around, I wouldn't want to go straight to legal advice, and then see a post on here which would have the answered the question is a more cost effective (for our client) way.

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06th Jun 2019 14:33

You may find this article useful:

https://www.crippspg.co.uk/forcing-third-party-buyout-minority-shareholder/

But it still comes back to legal advice necessary!

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to paulwakefield1
06th Jun 2019 14:43

Thanks Paul, that's very helpful

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06th Jun 2019 14:40

Thank you everyone for taking the time to answer.

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06th Jun 2019 15:29

@ dylanski (OP).

Whilst not professing to possess any legal (let alone company legal) qualifications, may I suggest that S.979 Companies Act 2016 (as kindly referred to by JohnG in his post at 16.49 yesterday) IS indeed
the legislation which enables the minority shareholder’s shares to be acquired compulsorily: and that such legislation is NOT confined to public companies. I assume of course that there are no other company documents
(including Articles) which impact upon that legislation.

On the subject of public companies, then the apparent dilemma in your question must of course have been encountered, in many thousands of cases, where a public company takeover takes place, where often there are thousands of shareholders. I surmise that a public company secretary who has dealt with a takeover would probably hold a template form suitable for your purposes; and I would surmise also that most of the company registration agencies would have experience thereof and be able to attend to the matter.

Nonetheless, if you (or your client company) contact a company lawyer, and ask whether (I surmise the answer will be in the affirmative) they have practical knowledge of the mechanics of a compulsory purchase of a “less than 10%” shareholder’s shares, then (for your peace of mind) I would recommend your client company's asking for a fee quotation for attending to this matter on their behalf, and proceed from there.

Basil.
EDIT. Apologies for being "late to the party" on this question.

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