Who should advise on selling a minority interest and exiting a company?

D

Desimomo07

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Hi,

Long story short, I'm a minority share holder in a business with other members. Im now looking to exit the business as the current direction of the company is not in line with what I feel is something I can continue to contribute to. I'm fairly confident this wont go down well with the other members, so I'm looking for advice from an accountant with some experience or expertise in this area.

Any recommendations or advice, most welcome.

TIA
 
Why an accountant I guess would be my first question?

Your issues sound commercial in the first instance and legal in the second.
 
Is the business worth anything? How minor is your stake? Do you also work at the business or did you just invest in it?

A solicitor is where I’d start, to review the shareholders agreement to see what your rights/options are.
 
I would agree with you that you should start with an accountant.

They will look at the accounts and give you an indication if there is any value in it and how you might approach exiting from it.

When you have that information and you decide what you want to do, you can talk to a solicitor.

If you have a partnership agreement, then it should be easy enough for you to understand without paying a solicitor to read it for you.

If you are a shareholder and employee of the company, you can leave your employment, and depending on what, you have agreed, retain your shareholding.

But an accountant would advise you on what the best business approach is.

Being a minority shareholder is not usually a good idea, so if you can reach an amicable agreement for them to buy you out, that would usually be the best outcome.

Brendan
 
Zenith63 said:
Is the business worth anything? How minor is your stake? Do you also work at the business or did you just invest in it?

A solicitor is where I’d start, to review the shareholders agreement to see what your rights/options are.
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Shareholders fund is a few million. I have a bit less than 40%. I dont really want to say too much online...
 
Brendan Burgess said:
I would agree with you that you should start with an accountant.

They will look at the accounts and give you an indication if there is any value in it and how you might approach exiting from it.

When you have that information and you decide what you want to do, you can talk to a solicitor.

If you have a partnership agreement, then it should be easy enough for you to understand without paying a solicitor to read it for you.

If you are a shareholder and employee of the company, you can leave your employment, and depending on what, you have agreed, retain your shareholding.

But an accountant would advise you on what the best business approach is.

Being a minority shareholder is not usually a good idea, so if you can reach an amicable agreement for them to buy you out, that would usually be the best outcome.

Brendan
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Thank you for that Brendan....I appreciate your input.
 
Agree with Gordon - if your stake is worth around €1m you need specialist skills which your normal local practice wouldn't usually have.

I would go with the Top 10 but outside the Big 4 - Grant Thornton, Mazars or BDO.

They would advise you on how to maximise your value and they would give you appropriate tax advice.

Brendan
 
Brendan Burgess said:
Agree with Gordon - if your stake is worth around €1m you need specialist skills which your normal local practice wouldn't usually have.

I would go with the Top 10 but outside the Big 4 - Grant Thornton, Mazars or BDO.

They would advise you on how to maximise your value and they would give you appropriate tax advice.

Brendan
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In my (limited) experience that's very good advice. Unless you are a big fish the big four will fob you off with a junior but still charge you an arm or a leg.

I was peripherally involved in an issue around contracts being unilaterally changed. At the first meeting I said that the clients just needed clarification as to whether they were employees or contractors. Four months and €28k later a barrister answered the question after a 10 minute conversation and an hour of reading.
 
Your headline question does not match your opening post. Your headline question asks about exiting a partnership agreement but you then go on to detail your query by referring to you leaving a company as a minority shareholder.

There are very different rules and laws governing the severance of a partnership agreement, as opposed to selling company shares, particularly as a minority shareholder (e.g. the application of oppression of a minority shareholder legal provisions).

An accountant and a lawyer are the options. If there is a partnership agreement in existence, this is the first thing they would want to look at.
 
At the end of the day your shareholding is only worth what you can sell it for.

Can you sell to an outside party or can you only sell to the other members. Even if you can legally sell to an outside party in reality it may be difficult to find someone who could or would actually buy in to a situation like this.

Protections for minority shareholders are sparse especially in a situation like this in (presumably) a private company, and trying to enforce them is not easy.

The shareholders funds may be substantial, but it is a long way from there to having the cash to buy you out. How would that be structured or financed. It is very unlikely that you can force your fellow shareholders to buy you out, and why would they want to, they can drive the company in whatever direction they wish using your money to do so.

Is there any way to persuade your fellow shareholders that they would be lucky to get the opportunity to buy you out.
 
Desimomo07 said:
I'm fairly confident this wont go down well with the other members...
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Are you sure about that?

Are you essential to the future success of the business, and if so, is there potential to retain some level of involvement, even if you do sell your shares - perhaps on a 3 day week, or long enough to train someone in that can replace you.

Your fellow owners are the people likely to pay you the best price, for your stake in the business.

Selling a minority interest in a privately owned company won't be easy, as few strangers will want to buy in as a minority shareholder.

Assuming the business continues to be profitable, so has funds available for distribution, the company can buy back your shares, and cancel them (subject to complying with company law).

If I were you, I'd ask the other shareholders to consider buying you out, without discussing any particular figure, and see what they say.

Consider a degree of flexibility when speaking with them, perhaps agreeing to sell down your shares over a few years, if they can't raise sufficient funds to buy you out on Day 1 (and you have one flexibility on when you need all of the cash).

If your fellow shareholders don't want to buy you out, a key supplier, or large customer, may have an interest.

Getting on to professional advisors, I don't think you need a Big 10 firm, and I definitely wouldn't go near a Big 4 firm, for the reasons outlined above. That's not to take away from any of the firms that have been mentioned - they are all good, but they will also be quite expensive.

There are several accountancy firms, that have strong well regarded teams to help advise, structure and negotiate buyouts, some of which are outside the Big 10. Names that spring to mind outside the big firms, and should be a bit cheaper, include Cronin and Co., JPA Brenson Lawlor or PKF.

I'd suggest that you also do a little research on how to value your business, if you haven't done this already - there will be different methods, such as Net Book Value, Enterprise Value, Break Up Value etc. Then try to form a reasonable view on what you think you'd like for your shares - keeping in mind that a minority 40% stake rarely sells for its full value.
 
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Any minority shareholder planning to exit a company should start planning their exit 12/18 months ahead of time. There can be a number of strategies and tactics to adopt. Further information may be read on link below:

Shareholder Disputes

We are expereinced experts in resolving shareholder disputes. Call us to today on 01 661 4066 for a free confidential talk.
www.frielstafford.ie www.frielstafford.ie

Jim Stafford
 
MrEarl said:
Selling a minority interest in a privately owned company won't be easy, as few strangers will want to buy in as a minority shareholder.
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Correct. And the existing shareholders would have to give consent to any new shareholder coming on board.
 
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