Transfer of Freehold-owning company share - advice needed?

GoodbyeFalcon

I'm looking for some advice in regards to transfer of a share in the company that owns the freehold of a flat that I have purchased. Here is the situation;

• I purchased an inner London Victorian flat with a "share of freehold" earlier this year.
• The exchange of contracts and completion went smoothly and we have now moved in
• The leasehold title was transferred to us without a problem
• The freehold is owned by a "residents management company", and each of the 3 flats in the building hold 1 share in the company. The company was only set up a few years ago at the time of freehold enfranchisement and this is the first example of a flat being sold under the structure, so a "test case"
• While the documents filed with Companies House confirm the shareholding and shareholders as described above, the shareholders tell me they never received Share Certificates - and these need to be sighted by my solicitor to effect the transfer of shares to my name. The solicitor who setup the company was fired (reasons not given) and the company now has no solicitor acting for it.
• In the absence of share certificates, the vendor's solicitor says that it is easier if the company just cancels the old share and issues a new one to me, but reading the company documents I think this would require a Special Resolution of shareholders which is a hassle for what should be a simple transfer of share. The company forming documents also do not appear to have been tailored for a residents management company as there is no mention of company purpose or requirement to be a leaseholder to be a shareholder as I understand is more typical for these companies. There is also no company bank account or sinking fund etc - basically a bit of a botched job at incorporating/managing this thing and no one seems to have any clue, leaving me to sort out their problem in order to finalise my purchase.

On the upside, the vendor has now resigned as Director and I have managed to get appointed as a Director (1 Director appointed for each flat) - but still there is no resolution to the share transfer issue.

I am looking for advice on how to best arrange the transfer of the share to myself with minimal hassle to me and the other Directors & Shareholders, minimal cost to the company/vendor, and in a legally sound manner. At the moment I am thinking the company should issue "replacement" share certificates to all shareholders, and then have the vendor transfer to me per normal, however do I need to appoint a solicitor to act for the company to arrange this? If not, how do I arrange this myself as a Director?

Thanks all for your views.

pretamang

Are you sure that the company actually has share capital?

It sounds like it could be a 'company limited by guarantee'. There are no shareholders, only members who act as guarantors.

A bank account or sinking fund is not required, nor does the company need to retain a solicitor. Someone will need to handle the annual filing requirements with Companies House, which could be one of he directors if they are confident with that sort of thing, or outsourced to an accountant or lawyer.

GoodbyeFalcon

Are you sure that the company actually has share capital?

Yes, Companies House incorporation filings confirm there are 3 Ordinary Shares issued, and that this is a private limited company.

A bank account or sinking fund is not required

The landlord is legally obliged to maintain a sinking fund under the leasehold agreement terms (however, this has not been complied with).

pretamang

Ah. In that case then the documents required are a little more complicated. I'm not a lawyer but have a little knowledge of how these things work in principle.

You can do these forms yourself as a director, but are you confident enough with the Companies Act that you'll get it right?

To replace a lost share certificate the company will need an indemnity from each shareholder confirming that they've lost their share certificate (not receiving one on issue is not an excuse).

Even if the company were to cancel the vendor's share I think they are still required to return the share certificate to the company for this to happen (the company is effectively buying the share back, it cannot just be cancelled).

I think you need to speak to other shareholders and discuss finding a solicitor get things straight.

I would ask your solicitor to pursue the vendor to go ahead with a proper transfer of the share to you; and I would also be asking them why they left this until after completion?

GoodbyeFalcon

Thanks. I think in regards to Share Cancellation, this is different from a Share Buyback (in which case the Share goes into the Company Treasury and can be re-issued or cancelled). However, the Company Directors do not have the power to just cancel shares as the Vendor suggests.

However, your suggestion that the Vendor should really have gotten themselves sorted on this matter rings true, as this was always part of the deal, and I am now going to push my solicitor to stress the case to the Vendor's solicitor. If the Company needs to appoint a solicitor to set things straight in regards to the share transfer, I think it would be reasonable to expect the Vendor to pay for the Company's legal costs, don't you?

I have reviewed the sale contract which specifies explicitly that the share should have been transferred "upon completion". As this was a couple of months ago now, I would suggest the Vendor is in breach of the sale contract, and could in theory be liable for penalty interest.