Private Limited Company acting illegally.

Ground Hog

Help!

I am on the point of selling my 25% stake in a private limited company for about 1% of the company's value. After 10 years I am desperate to extract myself from the company that I helped set-up. Since being forced out of the company I have not been supplied with annual accounts, informed of AGMs, and various company assets have been sold off without my knowledge. Despite threatening letters from two different solicitors the company ignores all attempts to extract accounts etc.

If I go to the Office of the Director of Corporate Enforcement how would it benefit me? I could prove that the company has been operating illegally by not informing me of AGMs or providing accounts requested but could I get the company wound-up? That is the only way I will see any money I think. I forgot to say that I put all my money into the company and that is the reason that I have not gone down the legal road. The company has assets of between €500,000 and €1,000,000 but I am being offered €5,000 for my 25% - I have to admit that I am sorely tempted to accept this offer. Has anybody any ideas? Please!!

Darragh29

Ground Hog wrote: »

Help!

I am on the point of selling my 25% stake in a private limited company for about 1% of the company's value. After 10 years I am desperate to extract myself from the company that I helped set-up. Since being forced out of the company I have not been supplied with annual accounts, informed of AGMs, and various company assets have been sold off without my knowledge. Despite threatening letters from two different solicitors the company ignores all attempts to extract accounts etc.

If I go to the Office of the Director of Corporate Enforcement how would it benefit me? I could prove that the company has been operating illegally by not informing me of AGMs or providing accounts requested but could I get the company wound-up? That is the only way I will see any money I think. I forgot to say that I put all my money into the company and that is the reason that I have not gone down the legal road. The company has assets of between €500,000 and €1,000,000 but I am being offered €5,000 for my 25% - I have to admit that I am sorely tempted to accept this offer. Has anybody any ideas? Please!!

I don't see how you can be forced out of the company, this side of you continuing to hold 25% of the issued share capital. As a shareholder, this is what AGM's are for, for you to engage with the directors. Is it a case where AGM's are being held and you are not being informed or is there just no AGM being held annually???

Ground Hog

There were 4 directors/shareholders in the company but only two active - the other two were reps from the local community - primarily to help in obtaining grants available to 'community' based projects. In 1998 the other active director and I fell-out (I was the Project Manager and lived in company property with my partner on site) and it became very unpleasant - in fact impossible - to remain in situ. I removed myself and partner from the project, leaving one of the non-active directors to vote as he saw fit on my behalf. Some months later I resigned as a director but remained as a shareholder. From that day (1998) to this I have not been informed of an AGM or received details of company accounts.

Darragh29

Ground Hog wrote: »

There were 4 directors/shareholders in the company but only two active - the other two were reps from the local community - primarily to help in obtaining grants available to 'community' based projects. In 1998 the other active director and I fell-out (I was the Project Manager and lived in company property with my partner on site) and it became very unpleasant - in fact impossible - to remain in situ. I removed myself and partner from the project, leaving one of the non-active directors to vote as he saw fit on my behalf. Some months later I resigned as a director but remained as a shareholder. From that day (1998) to this I have not been informed of an AGM or received details of company accounts.

Well the directors should be presenting the accounts to the shareholders. Is it making a profit this business or currently trading or what's the story there??? Did you check the CRO online facility to see if there have been any annual returns filed??? If you visit www.cro.ie you can search for the company and view submissions...

If these folks are not filing returns, then the company will be struck off for non-compliance. If they are filing returns, you can see them through the cro website...

Ground Hog

Yes - I am not a total idiot - I have looked at the returns that have been submitted to the Revenue and the company have made annual returns up to 2007/08 but how does that help me get a decent price for my shareholding. Is there some way that I can force the sale of the company? They are clearly not operating within company law if they do not inform shareholders of AGMs or supply copies of accounts when requested by my solicitor. The company is asset rich but generates little revenue and is gradually grinding to a halt. Thanks for your comments - thus far.

TheCostumeShop.ie: Ronan

Hi Ground dog,

First off Darragh isn't implying you an idiot he's just covering the obvious basics. If you have an asset that you value at 125K+ you really need to go and deal with this through a specialist solicitor - one of the top 5 would be most suited. Don't mistake this as a job for your family solicitor. In my experience i found that you need different solicitors (often different firms) for different jobs. I'd suggest that Arthur Cox would have experience dealing with exactly these type of cases.

Threatening solicitors letters are just that if you don't follow up the threat. Try to arrange a meeting with the other parties and solicitors from both sides. Do an Audit of the Assets and then offer to buy out the 75% (maybe you will need an investor to do this) at the price you deem the total assets of the company with an intension to asset strip or give them the options to buy your 25% at the asset stripped value of them.

Again i'm not an expert here and you really should get sound advice from a solicitor who has dealt with this type of case often.

Sonnenblumen

Fancy Dresser wrote: »

Hi Ground dog,

First off Darragh isn't implying you an idiot he's just covering the obvious basics. If you have an asset that you value at 125K+ you really need to go and deal with this through a specialist solicitor - one of the top 5 would be most suited. Don't mistake this as a job for your family solicitor. In my experience i found that you need different solicitors (often different firms) for different jobs. I'd suggest that Arthur Cox would have experience dealing with exactly these type of cases.

Threatening solicitors letters are just that if you don't follow up the threat. Try to arrange a meeting with the other parties and solicitors from both sides. Do an Audit of the Assets and then offer to buy out the 75% (maybe you will need an investor to do this) at the price you deem the total assets of the company with an intension to asset strip or give them the options to buy your 25% at the asset stripped value of them.

Again i'm not an expert here and you really should get sound advice from a solicitor who has dealt with this type of case often.

Assuming the valuation is € 125K which isn't a lot anyways, do you have any idea of the clock rate with A Cox or indeed any of the big % ? I don't think so and i would doubt any of the %'s would be interested in such a case.

The accounts (Balance Sheet) may state a value it believes the assets to be worth, but frequently such value can be completely at variance with market value, sometimes understated and sometimes exaggerated. No matter what the balance sheet states, finding buyer(s) to pay a price is a completely different kettle of fish.

Share value does not necessarily reflect company's true value, there are many good examples on the ISEQ, profitable trading cos with declining asset values. Lost confidence underlines the critical importance of cash in hand.

Mounting a bid to buy 75% might be an option, but I doubt the company would accept a € 15k offer for company. The OP seems to indicate the company isn't really trading so unlikely it would be interested in buying back shareholding.

But it does seem a classic case of shareholders inflating the co value based on asset value, the best and only one's that matter assets in current environment are liquid, ie CASH. Converting fixed assets to liquid in theory fine, but current environment, well remote!

What you think soemthing is worth is probably completely
different to what a buyer might think. C'est la Vie!

Darragh29

My take on this is that you just need to get out. When your in this situation you can't really win. Just cut your losses, the only people who ultimately win in a situation like this are the legal eagles.

blue4ever

Firstly good solicitor should help enormously.
Second: There is legalisation in the Companies Act that protects you as a director and shareholder. Covers stuff like you having to be informed of AGM and asset disposals.
I would play the card: You want a true and fair value for your share – if you don’t get satisfaction – apply to the courts to have the business wound up so that you can extract that value.
That puts the other lads in a pickle as their books would be scrutinised if that happened.
As a shareholder - were you not entitled to a dividend? where's that?

I would act with a good brief and, unfortunately, in these times – I would do it today!

Ground Hog

Darragh29 wrote: »

My take on this is that you just need to get out. When your in this situation you can't really win. Just cut your losses, the only people who ultimately win in a situation like this are the legal eagles.

Thanks for your advice, I think that it is the only option as I haven't the time or money to pursue this matter through the courts.

Lplated

There is a provision inthe companies acts (think its s.250), that allows for an application to the Court by oppressed shareholder/s (which you seem to be).

You value the company at between 500k and 1000k - assuming there's a basis for this then you share is worth 125 to 250k - if you choose to sell that for the minimal amount you're being offered, then thats up to you, but you should at least get a preliminary legal opinion from a solicitor before throwing that amount of money away.

TheCostumeShop.ie: Ronan

Ground Hog wrote: »

Thanks for your advice, I think that it is the only option as I haven't the time or money to pursue this matter through the courts.

Some people specialize in buying (investing in) companies to asset strip - ie. buying the business to cut it up and sell it in pieces. I remember one of my professors in college used to do it all the time for fun in the 80's and 90's. Very wealthy man now.

If you could find a solicitor who has an interest in such a venture you could joint venture with him at no risk!

My original idea of offering to either buy their share or sell your stock at a give valuation is because is because if the company no longer trades and you give the company a value and the other side an all in or all out offer then you bring something to the table worth discussing. Even if you don't follow through with the purchase greed will make them meet with you and you are far closer to a legal outcome.

elgransenor

Lplated wrote: »

There is a provision inthe companies acts (think its s.250), that allows for an application to the Court by oppressed shareholder/s (which you seem to be).

You value the company at between 500k and 1000k - assuming there's a basis for this then you share is worth 125 to 250k - if you choose to sell that for the minimal amount you're being offered, then thats up to you, but you should at least get a preliminary legal opinion from a solicitor before throwing that amount of money away.

It is section 205 and it protects the oppression of minority shareholders.

On the poster's facts this is a clear case of a very strong case of oppression of the minority's interest.

Issuing High Court proceedings for this matter would not be that expensive and it would force the other side to take you seriously.

The court,if it agrees with your case,can order the winding up of the company.

If you isssue proceedings and the other side go to their solr. that is what they will be advised. Then I think they will talk seriously to you.

The court can also order the other shareholders to buy you out at an independent valuation.If you are right about the assets etc.then you should seriously consider another solr. and talk to him about s.205 of the Companies Act.

antoinolachtnai

Think about the book value of the assets (assets - liabilities)? Is there property on top of that? is that where you see the value? If you want to PM me, fine, but I wouldn't discuss any more details in public.

Also think how much you invested.

You have to be realistic about values these days.

The burn in a big-five would be 200/hour - 300/hour basic. It's a lot. I really don't see this going well for you. There are other places that can do this stuff, but ultimately there has to be a return.

Are you prepared to offer them 50k for the business as it exists today? If you think the assets are worth something, I would see if you can do this. You might be able to force their hand at least.

It is really hard to win an oppression case. There are various blocking tactics they can adopt if you try this. For instance, they might ask you to invest more money in the business to maintain your shareholding, and you are not in a position to do this.

You might be as well to just sit tight. If they are going to have to liquidate the thing eventually, you might get something then. It's a matter of what 5 grand is worth to you. If you really could do with that money then you might be better to take it. If you can spare the money and are ready to put some slow steady pressure on these guys to give you a decent deal, then you can do that.

If you plan to do this, it might be worth writing to the company asking what's going on with AGM's and writing to the ODCE when they don't respond adequately. It will at least put the scares up them.

Do think about how much you need to get out of this. Have a figure in your mind for what would satisfy you.

The reality may be that in the current climate, they just don't have any cash to offer you.

But don't let it take ove your life.

elgransenor

Ground Hog wrote: »

Help!

I am on the point of selling my 25% stake in a private limited company for about 1% of the company's value. After 10 years I am desperate to extract myself from the company that I helped set-up. Since being forced out of the company I have not been supplied with annual accounts, informed of AGMs, and various company assets have been sold off without my knowledge. Despite threatening letters from two different solicitors the company ignores all attempts to extract accounts etc.

If I go to the Office of the Director of Corporate Enforcement how would it benefit me? I could prove that the company has been operating illegally by not informing me of AGMs or providing accounts requested but could I get the company wound-up? That is the only way I will see any money I think. I forgot to say that I put all my money into the company and that is the reason that I have not gone down the legal road. The company has assets of between €500,000 and €1,000,000 but I am being offered €5,000 for my 25% - I have to admit that I am sorely tempted to accept this offer. Has anybody any ideas? Please!!

If you are accurate with the figures you have supplied it would not be advisable to sell your 25% for 1% of the value.

If you are not prepared to go down the legal route to enforce your rights as a shareholder then maybe you should consider selling your stake to an outsider who would be prepared to take a punt on them.

If you want to email me about this feel free to do so.

antoinolachtnai

It is hard to see any outsider being willing to buy into a company where the value is relatively low, where they are not wanted and where they could easily be diluted or have to invest more cash. Also, depending on the Articles of the company, the other shareholders might have to get first refusal on the shares.

It is possible, but it is tricky.

Darragh29

I think situations like this are typically resolved with a loss of money but you get through another year in the school of hard knocks. OP, I'd say cut your losses and move on to the next project.

Ground Hog

The deed is done and I resisted the strong urge to punch my ex.business partner's lights out when we met to complete the deal. Onward and upward - and thanks for the advice!!