Nil paid shares?

gavcradd

Apologies if this is the wrong place to put this, but I can't see anywhere else to discuss shares, etc...

I had a very small shareholding in a local business, which I viewed as a donation really rather than an investment (although I could attend AGMs, EGMs, vote, etc). The board was made up of other local people. However, a few years ago a group of "investors" turned up, offering a substantial amount of money for seats on the board and were accepted on by the then chairman. It was publically stated that they had paid £250,000 for their shares and then began to run the company into the ground, drawing salaries and re-mortgaging property.

The end result was that the administrator was called in and the company ultimately liquidated. However, one of the facts to emerge from this was that the £250,000 of shares were actually "nil paid" - ie they hadn't paid a penny for them, but had promised to do so in the future.

Two questions - (1) was this illegal? and (2) what are the chances of the smaller shareholders actually doing anything about it to force them to pay up?

greenglide

Is it a publicly traded company (a proper PLC) or is it privately held company?

Shares in private companies are odd as generally you can't trade them in the same way and there is no "market" in the same way.

Who, exactly, did you think they paid the money to?

gavcradd

Thanks for the reply!

It was a privately held company (an LTD) - the articles of association said that there were 500,000 shares available at £5 each - these had not all been allocated, so the shares the investors "bought" were not from anyone else, but from the unallocated shares. The money (if there was any) would have gone into the business.

The gripe I have (and the reason for seeing if anything has been done illegally) is that the minor shareholders were very close to kicking the existing board out at an EGM prior to all of this happening. The "new investors" used their voting rights at the EGM to overturn this and keep the old board in place.

So...illegal? Is it realistic that the administrator may be able to get them to cough up the money? Not bothered about who it goes to, I just want justice to be done.