Business Partner Bankruptcy

Squareski

Hi - apologies if this is not the right place to post.  I'm a director in a small limited company with a business partner who is also a director.  We have an equal number of shares each (as well as other share holders), with ours holding a majority.  He may be declaring bankruptcy personally so I'm worried how this will affect our business.  I understand that he will not be able to be a director but I don't know what will happen to his shares or if there are any other ramifications.  Can anyone provide any advice?  Again, apologies if this is not an appropriate place to post and remove if so.

Thanks 

luvchocolate

Other experienced poster's will reply but until they do may I suggest you contact Business Debtline. 
Maybe check out their website there maybe something similar. 

MEM62

His bankruptcy will disqualify him as a director.  However, being a director and being a shareholder are different things.  Theoretically, his shares will have a value and, as such, the OR may have an interest in these and they could be sold to pay towards his debts.  This, of course, is a more complicated issue in smaller companies but it is possible that you could end up with a new business partner.   

TripleH

You (and other shareholders) could buy the shares back off of the bankrupt person if you don't want another new investor (or hold them in trust or a.n. other arrangement), the key points are:

1. Any share transaction must be done at a fair market value.

2. You cannot not pay a dividend on the bankruptee's shares if everyone else (with the same shares type) gets a dividend on their shares.

If you 'value' the shares to be not worth a lot, it's better to pay for an independent valuation than use your accountant. Although it's maybe better to get your accountants to put together a draft valuation now especially if trading since the last accounts has been less than you like or you expect performance as a result of increased prices to affect profits...

ellgren

Once your business partner goes bankrupt then the shares will be vested in the Official Receiver / Trustee in Bankruptcy in light of Section 306 of the Insolvency Act 1986. The Articles of the company should entitle you to purchase the shares for such a company structure as explained but you will need to consult the Articles to see what they say. 

ellgren

TripleH said:

You (and other shareholders) could buy the shares back off of the bankrupt person if you don't want another new investor (or hold them in trust or a.n. other arrangement), the key points are:

1. Any share transaction must be done at a fair market value.

2. You cannot not pay a dividend on the bankruptee's shares if everyone else (with the same shares type) gets a dividend on their shares.

If you 'value' the shares to be not worth a lot, it's better to pay for an independent valuation than use your accountant. Although it's maybe better to get your accountants to put together a draft valuation now especially if trading since the last accounts has been less than you like or you expect performance as a result of increased prices to affect profits...

I do not see why you could not pay dividends? The problem might be that if you did pay dividends before the share issue had been resolved, then the bankrupt's dividend would be potentially claimable by the Trustee in Bankruptcy as after acquired property in light of Section 307 of the Insolvency Act 1986.

TripleH

Badly worded. Yes you can pay dividends but the dividend would go to receiver which some companies might not want to happen.