This webinar was presented on 17 July 2014.
During this webinar, we discuss:
- Closely held Pty Ltd companies often function like a partnership where shareholders are also directors (or are represented by a director who controls the shareholder)
- Business partners can fall out when they disagree about:
- how a business should be run day-to-day or its future direction
- Retirement of a director/shareholder (or more than one) and how they will be remunerated for their stake; or
- Conflicts of interest between the jointly held company and one of its directors or an entity controlled by a director.
- Director duties bind each director and majority directors to act in the best interests of the Company and the shareholders as a whole and to act in good faith/avoid conflicts
- But minority shareholders (or majority) may have legitimate interests which are not inconsistent with the best interests of the Company and shareholders eg.
- Retirement due to age/ill health or
- departure due to incompatible views
- Easier to part ways if:
- A Shareholders Agreement sets out protocols or mechanisms for disputes or departures; or
- company trades through separate business outlets run by the respective shareholders and can be sold or separated into its component parts
- Otherwise, market for an individual shareholder’s stake is potentially very limited:
- Remaining shareholders buy departing shareholder’s stake for value (usually have pre-emptive rights)
- find a buyer who will pay full value for stake and is acceptable to remaining shareholders
- sell or wind-up the whole company
- Deed of Separation
- Self-help by majority shareholders consistent with director duties
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