Private Limited Company Help / Advice Required

Okrib

I hope you guys can offer some advice.

Background - small private limited company in real estate, established for 125 years. There are circa 30 shareholders. Typical rights of pre-emption on disposal of shares etc. I am the largest shareholder (approx 26%), however the Directors have refused to offer me a place on the board. The next largest shareholder has 13%. I have more shares than the entire board combined.

Share transfers were always free, and my wife and I would annually make sure that we were as tax efficient as possible by transferring between ourselves, however I have now been advised that in future (and only for one specific category, that just so happens to affect us), there will be a charge of £150 plus VAT per transfer. The questions are as follows:

Can they decide to only charge someone based on their specific circumstance, or must there be a charge for anyone making a share transfer. I believe it should be the latter.

£150 plus VAT also seems excessive. It's not a huge amount of work, the Directors and Company Secretary are already remunerated significantly for very little work as it is. I would have thought £50 plus VAT would be fair, though I don't think there should be any charge. Thoughts?

Secondly, am I correct in thinking it is unacceptable for the Directors to set their own pay without consulting shareholders? The directors never consult on their own pay, they simply set it at what they see fit (unsurprisingly this only ever increases). Furthermore, they recently cut dividends to shareholders while increasing their own pay. I consider this unacceptable. Thoughts?

Thirdly, what should a Director's pay be? They attend 4 board meetings a year, and an AGM. They retain a professional adviser and have no expertise in the area the company operates in. What would you consider an acceptable level of remuneration? Would you calculate it on an hourly rate (if so, what?), or a percentage of turnover (if so, what?). I would be astonished if they work more than 100 hours per year.

I should note that under the present board dividends have fallen significantly and there have been no transactions for over 5 years. To the best of my knowledge there is no corporate governance or 5 year rolling business plan.

Any thoughts or comments would be appreciated as I am very unhappy with the situation overall and want to resolve it.

Pennywise

With 26% of shares, all you can do is to block special resolutions - you have no control over the day to day running of the company.

Presumably, the other shareholders act as a group against you, thus securing the 51% shareholding needed to approve the annual general meeting resolutions, i.e. to approve Board appointments, etc.

Your only "rights" as such are to attend the annual general meeting and to vote against any resolutions you don't like. With 26%, you can cause a bit of trouble, i.e. to demand an annual general meeting happens each year, etc., but if there are more than 50% shareholders against you, you'll only ever be a nuisance with no real power.

The rules for small private limited companies are a lot less onerous than large/public companies, so the directors have far fewer reporting responsibilities etc.

Your best course of action would be to get together with some other shareholders to try to reach 51% where you can really start taking control, i.e. to sack the Board or appoint your own directors (or yourself) - with only 26% you can't do any of that on your own.

bris

As Above, with 26% you have nothing, get another 25% on board with you then you can have a real say.

paddyrg

Get more shareholders behind you - you have a compelling case for you to all join forces, fire all the directors and put your own in place with a directive to increase shareholder value/dividends.

Edit - as a bonus, you could have a plan to dilute massively after your coup, or go for a full restructure - could be quite fun as land-grabs go.

antrobus

Okrib wrote: »

...Share transfers were always free, .

You need to look at the articles of association to see what it says about 'share transfers' and and any fees payable.

It would need a special resolution to change the articles.

Okrib wrote: »

..Secondly, am I correct in thinking it is unacceptable for the Directors to set their own pay without consulting shareholders? ....

Again you need to look at the articles of association. Normally it says something along the lines of that the directors are entitled to be paid whatever the board of directors sees fit. Whether you think this is "acceptable" or not doesn't really matter.

Okrib wrote: »

....I am very unhappy with the situation overall and want to resolve it.

As already suggested, I suspect your main option is to contact the "next largest shareholder" with 13%, find some more shareholders with 12% of the equity, and take control of the company yourself.

Or you could see if anybody wants to buy your 26%.

Or you could launch a legal action under s994 Companies Act 2006, on the grounds of unfair prejudice. But then lawyers don't come cheap.
http://www.ashfords.co.uk/article/guide-to-unfair-prejudice-against-shareholders

Okrib

Thanks all for the replies. None of the shareholders would be able to afford to buy my shares. The company has a net worth in the low 8 figures (hence why I find the lack of corporate governance / business plan astonishing and frightening).