Buying shares in private company


C

cheesey

I am in the process of buying shares in a company I work for. I'm there
finance guy so I know what the accounts are like. I'm buying 10% of the
shares but they have split all the shares into categories.

Category A is 75 % of the total shares
Catagory B is 25% of the shares. I will be buying 10% of the category B
shares.

They have advised me in writing that category B shares have the same
dividend and voting rights as A so what would or could be the difference in
these shares?

I'm just conscious or suspicious that they will have something up their
sleeve that I haven't thought of.

Many thanks in advance,

Cheesey
 
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T

Tim

They have advised me in writing that category B shares
have the same dividend and voting rights as A so what
would or could be the difference in these shares?
Check out the company's Memorandum and Articles of Association, to see what
differences there are. Bear in mind that these may be changed in the
future!
 
D

Dave

I am in the process of buying shares in a company I work for. I'm there
finance guy so I know what the accounts are like. I'm buying 10% of the
shares but they have split all the shares into categories.

Category A is 75 % of the total shares
Catagory B is 25% of the shares. I will be buying 10% of the category B
shares.

They have advised me in writing that category B shares have the same
dividend and voting rights as A so what would or could be the difference in
these shares?

I'm just conscious or suspicious that they will have something up their
sleeve that I haven't thought of.

Many thanks in advance,

Cheesey
it's early (5.45am) but it would appear from my basic maths that if you
are indeed buying 10% of the category B shares that would be 2.5% of the
total shares..... not as you say in paragraph 1 (I'm buying 10% of the
shares)
 
C

cheesey

Thanks for the reply. Excuse my ignorance but if I bought 10% of category B
shares and at the time they had the same rights as category A, what could
they change in the memorandum & articles of association on the category A
shares to cause me a problem?
 
J

John-Smith

cheesey said:
I am in the process of buying shares in a company I work for. I'm there
finance guy so I know what the accounts are like. I'm buying 10% of the
shares but they have split all the shares into categories.

Category A is 75 % of the total shares
Catagory B is 25% of the shares. I will be buying 10% of the category B
shares.

They have advised me in writing that category B shares have the same
dividend and voting rights as A so what would or could be the difference in
these shares?

I'm just conscious or suspicious that they will have something up their
sleeve that I haven't thought of.

Many thanks in advance,

Cheesey
Shares in a private ltd co are likely to be worthless, in that they
can be difficult or impossible to sell.
 
D

Doug Ramage

John-Smith said:
Shares in a private ltd co are likely to be worthless, in that they
can be difficult or impossible to sell.
A lot would depend on the business and the assets.
 
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C

cheesey

anyone got any answers to what they could change in the memorandum and
articles of association to create a problem.

Many thanks in advance
 
K

Keith

cheesey said:
anyone got any answers to what they could change in the memorandum and
articles of association to create a problem.
They (being the majority of shareholders/ board directors) can, for any
class of shares, change the voting rights, dividend rights, amend the
allowable transfer rules, plus a host of other minor hassles which
depend on the Mem/Arts originally adopted..

... but to do so they have to apply to the High Court... Companies Act
demands it.. (1)

...and it's easier/cheaper to sell the existing company to a new company.
(2) Which, if they are shrewd, would have been formulated to
disenfranchise you.

In a nutshell, what you have is worth a barrel of soapsuds.

(1) Minimum 75% of voting shareholders agreement (3)

(2) Minimum 51% shareholders agreement (3)

(3) If the Mem/Arts decrees more/less so be it. (4)

(4) Advice = negotiate a deal. You're obviously unhappy, so give 'em
what they want.

Hope this helps
 
P

Peter Saxton

I am in the process of buying shares in a company I work for. I'm there
finance guy so I know what the accounts are like. I'm buying 10% of the
shares but they have split all the shares into categories.

Category A is 75 % of the total shares
Catagory B is 25% of the shares. I will be buying 10% of the category B
shares.

They have advised me in writing that category B shares have the same
dividend and voting rights as A so what would or could be the difference in
these shares?

I'm just conscious or suspicious that they will have something up their
sleeve that I haven't thought of.

Many thanks in advance,

Cheesey
The reason to have two classes of shares is so they can declare
dividends to one class without having to pay the other class the same
dividend.

You could end up never getting any dividends.

Buying a minority of shares in a private company is not usually a good
idea unless you have a shareholders agreement that is reasonable.
 
K

Keith

Peter Saxton said:
The reason to have two classes of shares is so they can declare
dividends to one class without having to pay the other class the same
dividend.
This has to be clearly specified in the company's Articles of
Association, Peter.
'A' shares would/ should be classified as preferential if this is
indeed the case.

OP should ask Company Secretary for a copy of Mem/Arts. Any change to
these requires approval/registration with Companies House following an
EGM of the existing shareholders, so he should also ask for a copy of
all AGM/EGM Minutes.
Buying a minority of shares in a private company is not usually a good
idea unless you have a shareholders agreement that is reasonable.
Concurrence. 2.5% of the total share capital is not worth the paper
they're written on in most cases.
 
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J

John-Smith

Peter Saxton said:
Buying a minority of shares in a private company is not usually a good
idea unless you have a shareholders agreement that is reasonable.
I wouldn't do it unless I had control i.e. >50%.
 

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