Locked in shareholing.

54and56

Assuming there is no shareholders agreement and standard off the shelf Memo & Arts I'm interested to know what if any legal options someone (Mr A) with 50% of the Ord shares in a Ltd Co would have to unlock their value when the other 50% shareholder (Mr isn't interested in either selling the company as a whole or buying Mr A's shares.

I assume it's just a case of bad planning and unless Mr A can find an external buyer for his 50% (let's assume it's very unlikely) he is effectively locked into his shareholding until Mr B consents to either a sale of 100% of the shareholding in the business or makes an acceptable offer to Mr A for his 50%.

Am I correct in that assumption or is there some way Mr A can force a winding up of the business and a distribution of the net assets?

nuac

Mod
I assume this is a hypothetical question. Leaving it open for general discussion, subject to forum rule against legal advice

54and56

100% hypothetical and I'm not just saying that.

Claw Hammer

Any shareholder in what is a quasi-partnership company can petition the court for a winding up of the company on the grounds that it is just and equitable to do so. Murphs Restaurant is an early case on this.

54and56

Claw Hammer wrote: »

Any shareholder in what is a quasi-partnership company can petition the court for a winding up of the company on the grounds that it is just and equitable to do so. Murphs Restaurant is an early case on this.

Thanks Claw. I had thought so too but my understanding is that in order to establish that a Quasi Partnership exists the business must pass a test first established via Ebrahimi v Westbourne Galleries Ltd [1973] in the UK which in essence identified the factors which the court should consider when determining if there is a quasi partnership. These include:

1. An association formed or continued on the basis of a personal relationship involving mutual confidence.

2. An agreement that all or some of the shareholders will be involved in the conduct of the business.

3. Restrictions on the transfer of a member's interest (i.e. on disposal of shares)

Ref #1. In my example let's assume the two shareholders were not friends prior to starting the business, it was a marriage of convenience between two people who were introduced to each other by a 3rd party shortly before they started the business.

Ref #2. Lets assume both MR A and Mr B work in the business and are directors of the business.

Ref #3 - There is no restriction on the sale of Mr A's shares. If he can find a buyer for his 50% he is free to do so but he can't.

In your opinion given the above scenario would Mr A have an ability to force a winding up of the company?

Claw Hammer

Je_suis_Jean wrote: »

Thanks Claw. I had thought so too but my understanding is that in order to establish that a Quasi Partnership exists the business must pass a test first established via Ebrahimi v Westbourne Galleries Ltd [1973] in the UK which in essence identified the factors which the court should consider when determining if there is a quasi partnership. These include:

1. An association formed or continued on the basis of a personal relationship involving mutual confidence.

2. An agreement that all or some of the shareholders will be involved in the conduct of the business.

3. Restrictions on the transfer of a member's interest (i.e. on disposal of shares)

Ref #1. In my example let's assume the two shareholders were not friends prior to starting the business, it was a marriage of convenience between two people who were introduced to each other by a 3rd party shortly before they started the business.

Ref #2. Lets assume both MR A and Mr B work in the business and are directors of the business.

Ref #3 - There is no restriction on the sale of Mr A's shares. If he can find a buyer for his 50% he is free to do so but he can't.

In your opinion given the above scenario would Mr A have an ability to force a winding up of the company?

I would think so. There are only two shareholders and a court would not force them to continue together if they are not getting on.

54and56

Claw Hammer wrote: »

I would think so. There are only two shareholders and a court would not force them to continue together if they are not getting on.

Thanks.

Just a small point. Although unlikely, it's possible the two shareholders do in fact continue to get on i.e. Mr A respects the fact Mr B doesn't want to sell 100% of the company at this time (e.g. he may be much younger than Mr A) and either can't for financial reasons or simply doesn't want to invest any more in the company by acquiring Mr A's shares.

I know if I was Mr A I'd probably be a bit pi$$ed off with Mr B but I'm sure not everyone would take such a personal perspective on the scenario!!

Claw Hammer

Je_suis_Jean wrote: »

Thanks.

Just a small point. Although unlikely, it's possible the two shareholders do in fact continue to get on i.e. Mr A respects the fact Mr B doesn't want to sell 100% of the company at this time (e.g. he may be much younger than Mr A) and either can't for financial reasons or simply doesn't want to invest any more in the company by acquiring Mr A's shares.

I know if I was Mr A I'd probably be a bit pi$$ed off with Mr B but I'm sure not everyone would take such a personal perspective on the scenario!!

The court won't be analysing their relationship to that extent. The fact that one wants to get out and has come to court would be enough for the court.