company buyout question


Q

question

Hi,

I am one of three directors of a small company (10 employees, 500K
turnover), split into three equal parts. The company has been going for
about 6 years. There is no shareholder agreement, and there are no
relevant changes in the articles. Recently, the other two directors
announced their intention to sell their shares as they both wanted to
exit the business.

I am not in a position to offer the amount of cash that they want for
their share (the company itself requires additional investment in thes
short-term), and so they have found a company buyer for their proportion
of the shares. Going from a three-person board to a two-person one
obviously changes the balance of things a bit.

I am concerned about the position this would leave me in as a minority
shareholder. Would it ever be possible to sell my shares in future (is
anyone likely to be interested?!), or, as control can be transferred
without my involvement, does my share effectively become irrelevant? As
a minority shareholder, are there any decisions that I can block, or am
I just "along for the ride" from that point on.

Thanks,

Pete
 
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P

Peter Saxton

Hi,

I am one of three directors of a small company (10 employees, 500K
turnover), split into three equal parts. The company has been going for
about 6 years. There is no shareholder agreement, and there are no
relevant changes in the articles. Recently, the other two directors
announced their intention to sell their shares as they both wanted to
exit the business.

I am not in a position to offer the amount of cash that they want for
their share (the company itself requires additional investment in thes
short-term), and so they have found a company buyer for their proportion
of the shares. Going from a three-person board to a two-person one
obviously changes the balance of things a bit.

I am concerned about the position this would leave me in as a minority
shareholder. Would it ever be possible to sell my shares in future (is
anyone likely to be interested?!), or, as control can be transferred
without my involvement, does my share effectively become irrelevant? As
a minority shareholder, are there any decisions that I can block, or am
I just "along for the ride" from that point on.

Thanks,

Pete
It's unlikely someone would be interested in your shares in the
future.

Because you have more than 25% of the voting shares you can block
certain things but not enough to make the shares attractive.

I would say you have three options:

1. Try to borrow enough to buy your co-directors' shares,
2. Try to sell to the buyer of the other shares, or
3. Consider whether you are needed by the company and have any
leverage in salary and/or dividends enough to stay.

I would recommend you get your own accountant independent of the other
directors.
 

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