Q: When my husband and I got divorced I remained a director and shareholder of the family business, though I have never played an active role in the day to day running. Whilst the covid situation badly affected the business it managed to stay afloat. However, my now ex-husband has informed me that the business needs restructuring for the long-term, and as he feels he is too old to do it he has decided to sell out to his stepson. He says as a minority shareholder I have no say in the matter. I asked for proof that the business has been properly valued but he has ignored me. I fear some underhand negotiations that could be doing me out of my fair share of the sale proceeds. Can I do anything?
A: Whilst majority shareholders generally have control over a company, all shareholders have standard rights enabling them to vote on constitutional changes to a company. Usually there is a clause within the articles of association which lays out very clearly the balance between the competing interests of majority and minority shareholders. In some cases, decisions only require a 50% agreement. However, if you own 25% or more of the shares, under the Companies Act 2006 you would be considered a ‘person of significant control’.
Often, ‘drag along’ and ‘tag along’ rights are incorporated into articles of association. ‘Drag along’ rights protect the rights of majority shareholders enabling them to force minority shareholders to sell their shareholding where an offer has been made for 75% minimum of a company. ‘Tag along’ rights protect the rights of minimum shareholders and ensure that majority shareholders engaging in a sell-out must formulate an acceptable deal for the purchase of minority shareholders.
You should make an appointment to see a solicitor immediately and take with you a copy of the company’s articles of association and shareholder agreement so that they can check out your position.
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