Discussing UK law. Links: swarb.co.uk | law-index | Acts | Members Image galleries

Minority shares in private LTD company. How safe?

Re: Minority shares in private LTD company. How safe?

Postby jantra » Sun Aug 17, 2014 7:14 pm

check the accounts, write to the company asking to see the share register. they are obliged to provide a full register of members in writing. check the register correlates to the accounts.
jantra
 
Posts: 447
Joined: Sun Nov 25, 2012 10:59 am

Re: Minority shares in private LTD company. How safe?

Postby JeffMurdock » Mon Aug 18, 2014 10:57 am

Hi again,

I have obtained copies of various docs including the Articles of Association and I find this:

7. Drag along rights on a change of control


7.1. If the holders of more than 50% of the shares then in issue (Shareholder Majority) want to transfer all their shares (Relevant Shares) on arms length terms and in good faith to any person who is not a shareholder (the Purchaser) they shall have the option (Drag Option) to require the other shareholders (Dragged Shareholders) to transfer all their shares (Dragged Shares) to the Purchaser with full title guarantee in accordance with this article 7.

7.2. To exercise the Drag Option the Shareholder Majority shall give an irrevocable notice in writing (Drag Notice) to the Dragged Shareholders. The Drag Notice shall specify:
7.2.1 that the Dragged Shareholders are required to transfer their Dragged Shares to the Purchaser;
7.2.2 the price receivable by the Shareholder Majority for the Relevant Shares (including details of any non-cash consideration (Non-Cash Consideration) receivable by the Shareholder Majority (or any of them) which, having regard to the substance of the transaction as a whole, can reasonably be regarded as an addition to the price paid or payable for the Relevant Shares (or any of them));
7.2.3 the price the Dragged Shareholders will receive for each Dragged Share (Drag Price) and details of how that price has been calculated;
7.2.4 the name of the Purchaser; and
7.2.5 the proposed date for completion of the transfer of the Relevant Shares and the Dragged Shares (which shall be at least seven days after the date of the Drag Notice).

7.3. The Drag Price shall be equal to the price per Relevant Share receivable by the Shareholder Majority (including the cash equivalent of any Non-Cash Consideration). Any dispute about the calculation of the Drag Price shall immediately be referred to an Expert (whose decision shall, in the absence of manifest error, be final and binding) and pending its determination neither the Relevant Shares nor the Dragged Shares shall be transferred to the Purchaser.

7.4. Unless the Shareholder Majority and the Dragged Shareholders agree otherwise, the transfer of the Relevant Shares and the Dragged Shares (including payment of the consideration) shall take place on the same day.

7.5. The Company is unconditionally and irrevocably authorised to appoint any person as agent of each Dragged Shareholder to execute the required stock transfer forms for the Dragged Shares in the name and on behalf of that Dragged Shareholder and to do such other things as are necessary to transfer the Dragged Shares pursuant to this article 7.

7.6. The provisions of this article 7 shall prevail over any contrary provisions of these articles, in particular they shall override the pre-emption rights set out in article 5.6 and the Shareholder Majority shall be entitled to sell the Relevant Shares free from such pre-emption rights. Any Transfer Notice or deemed Transfer Notice served in respect of any shares shall automatically be revoked by the service of a Drag Notice.


There's also a clause about "Leavers" - i.e. people who leave the company. I don't believe it applies to my class of share though.

I can provide the full document (anonymised) to anyone interested enough...


JM
JeffMurdock
 
Posts: 12
Joined: Fri Aug 15, 2014 5:20 pm

Re: Minority shares in private LTD company. How safe?

Postby atticus » Mon Aug 18, 2014 11:12 am

Please note that the majority shareholder has the option to "drag along" the minority shareholders on a sale of his shares. He does not have to do so.
User avatar
atticus
 
Posts: 19927
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Minority shares in private LTD company. How safe?

Postby atticus » Mon Aug 18, 2014 11:14 am

If you want advice on the documents, and bearing in mind this site's "no advice" rule, then you should consult a solicitor.
User avatar
atticus
 
Posts: 19927
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Minority shares in private LTD company. How safe?

Postby JeffMurdock » Mon Aug 18, 2014 11:27 am

Please note that the majority shareholder has the option to "drag along" the minority shareholders on a sale of his shares. He does not have to do so.


I can't think of a reason why he would not want to 'drag along' minority shareholders.... That would surely leave the "little guys" with a larger stake in the company than himself and I can't think he'd want that for a second.
JeffMurdock
 
Posts: 12
Joined: Fri Aug 15, 2014 5:20 pm

Re: Minority shares in private LTD company. How safe?

Postby dls » Mon Aug 18, 2014 11:39 am

If he is selling his interest - why should he retain any interest in what happens afterward.

The document is sufficiently complex and particular, and again you talk of different classes of shares, to justify you receiving proper advice direct.
David Swarbrick (Admin) dswarb@gmail.com - 0795 457 9992
User avatar
dls
Site Admin
 
Posts: 12274
Joined: Thu Nov 01, 2012 1:35 pm
Location: Brighouse, West Yorkshire

Re: Minority shares in private LTD company. How safe?

Postby JeffMurdock » Mon Aug 18, 2014 12:05 pm

If he is selling his interest - why should he retain any interest in what happens afterward.


Simply because that's the kind of person he is. It's "his" company and if he sells his stake, he'll be sure to make others do so too.

The document is sufficiently complex and particular, and again you talk of different classes of shares, to justify you receiving proper advice direct.


I was just pointing out (as I'd mentioned the share 'classes' before) that it appears that my class of share is not subject to the same restrictions as 'lower' class shares in respect of what happens if the holder leaves the company. This does seem quite clear in the AoA document.

I'm grateful for any opinions and I am simply trying to gain a better understanding of the law in this respect.

Thanks!
JM
JeffMurdock
 
Posts: 12
Joined: Fri Aug 15, 2014 5:20 pm

Re: Minority shares in private LTD company. How safe?

Postby dls » Mon Aug 18, 2014 12:09 pm

You need to understand that the bulk of the applicable law is that which is contained in the various documents you have. They are not standard.

They appear professionally drafted, and it is a sensible working assumption (displaceable) that they fit in with the general law.
David Swarbrick (Admin) dswarb@gmail.com - 0795 457 9992
User avatar
dls
Site Admin
 
Posts: 12274
Joined: Thu Nov 01, 2012 1:35 pm
Location: Brighouse, West Yorkshire

Re: Minority shares in private LTD company. How safe?

Postby atticus » Mon Aug 18, 2014 12:21 pm

JeffMurdock wrote:
Please note that the majority shareholder has the option to "drag along" the minority shareholders on a sale of his shares. He does not have to do so.


I can't think of a reason why he would not want to 'drag along' minority shareholders.... That would surely leave the "little guys" with a larger stake in the company than himself and I can't think he'd want that for a second.
muddled thinking. That would leave him having sold his shares and with the money in the bank, and you still owning a small minority stake but with a new majority shareholder.
User avatar
atticus
 
Posts: 19927
Joined: Sun Nov 11, 2012 2:27 pm
Location: E&W

Re: Minority shares in private LTD company. How safe?

Postby jantra » Mon Aug 18, 2014 12:23 pm

JeffMurdock wrote:
Please note that the majority shareholder has the option to "drag along" the minority shareholders on a sale of his shares. He does not have to do so.


I can't think of a reason why he would not want to 'drag along' minority shareholders.... That would surely leave the "little guys" with a larger stake in the company than himself and I can't think he'd want that for a second.


you'll have to explain your arithmetic here. i'm not sure how a minority interest passing over their rights to a new issue can leave the majority shareholders interests diluted
jantra
 
Posts: 447
Joined: Sun Nov 25, 2012 10:59 am

PreviousNext

Return to Company Law

Who is online

Users browsing this forum: No registered users and 1 guest