Share this content
11

Shareholding Question - Absence of Agreement

Didn't find your answer?

Search AccountingWEB

Anyone help with the below...

Minority Shareholders introduced - without going into specifics...no shareholders agreement in place. 

In brief......Majority shareholders would like to buy back the shares of the minority or sell the company. With the absence of a shareholders agreement can the majority shareholders outvote the minority? 

Replies (11)

Please login or register to join the discussion.

By johngroganjga
09th Sep 2019 16:44

This is a legal question, which to some extent depends on the extent of the majority’s majority. What is it? More than 50%? More than 75%? More than 90%?

Thanks (0)
Replying to johngroganjga:
avatar
By Reb001
09th Sep 2019 16:55

Yes appreciate its a legal question.
Majority - 3 share holders totalling 66%
Minority 2 shareholders totalling 34%

Thanks (0)
avatar
By WhichTyler
09th Sep 2019 17:18

Have they tried offering the minority shareholders ready money?

Thanks (1)
Replying to WhichTyler:
avatar
By Reb001
10th Sep 2019 09:03

That's plan A - but majority think they will not accept (not for gain - just to be difficult) so looking at all options

Thanks (0)
Replying to Reb001:
avatar
By WhichTyler
10th Sep 2019 09:14

remember that options include offering them more...

Thanks (1)
avatar
By Clinton Lee
09th Sep 2019 23:15

In short, no!

Nobody can force a shareholder to sell his shares. Having a majority, whether it's a 66% majority or a 99% majority makes no difference. You can't force the minority shareholders to sell.

With respect selling the company, it's easier said than done. Selling doesn't just happen, it takes a lot of careful preparation, putting together the right deal team (adviser/broker, lawyer, accountant) and spending a fair bit of money up front! And even then there's no guarantee you'll find a buyer far less a buyer with the right offer.

If it's a sale of shares (rather than assets) you need to ideally get all the shareholders on board with the sale, and agreed on price / terms. Buyers are highly unlikely to buy into a firm where there is an ongoing dispute between shareholders.

Further, buyers generally don't want to buy a 66% share, they want 100% (unless the business is big enough, with exponential growth, and is likely to be of interest to private equity - I wrote about that on accountingweb's sister site a few years ago: https://www.accountingweb.com/community/blogs/clinton-lee/is-your-client...).

Thanks (1)
Replying to Clinton:
By johngroganjga
10th Sep 2019 08:12

Clinton wrote:

Nobody can force a shareholder to sell his shares. Having a majority, whether it's a 66% majority or a 99% majority makes no difference. You can't force the minority shareholders to sell.

Not quite. Isn’t it the case that if an offer to sell the company has been accepted by holders of 90% of the shares, the remaining shareholders can be forced to accept the same offer?

Thanks (1)
Replying to Clinton:
avatar
By Reb001
10th Sep 2019 09:10

Thanks.
With the absence of a share holders agreement and the minority having non-voting shares I wasn't sure if there was a way.
Buyer already in place.
A. wanting the minority's shares , or B. Purchase 100%
The feeling is the minority wont sell just to be difficult.

Thanks (0)
Replying to Reb001:
By johngroganjga
10th Sep 2019 11:55

I think your clients should move on from their feelings about what the minority shareholders would or would not like to do, and actually ask them.

As an offer has been received, which presumably is for all the shares, the 66% should sit down with the 34% and say this is the offer on the table, which for our part we think is a reasonable offer which we are minded to accept. What do you think?

Thanks (0)
avatar
By paul.benny
10th Sep 2019 08:51

Buying out the minority holders or the majority selling their share are very different propositions. Sounds more like a falling out between the shareholders.

Have there been any discussions between the various parties?

Thanks (1)
Replying to paul.benny:
avatar
By Reb001
10th Sep 2019 09:18

Yes very different. No falling out as such but minority are causing obstacles and halting the business growth for personal gain elsewhere.

Majority exploring all their options as to how they move the business forward with the potential buyer/investor.

Thanks (0)
Share this content