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Issusing Shares to reduce shareholders influence

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  • 21-07-2012 8:40pm
    #1
    mac10guns
    Registered Users Posts: 36 ✭


    I am a shareholder in a private limited company. We have the usual 100 shares issued out of 100,000 @ IR1.00 each. They are split as follows Shareholder1 - 60%, Shareholder2 - 30% and Shareholder3 - 10%. Shareholder3 has left the company and started in competition, and he refuses to sell back or give back the shares. Can we issue more shares to dilute his shareholding percentage. We feel he is unlikely to put in the required capital to maintain his current level.
    Tagged:


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    #2
    ICCM
    Closed Accounts Posts: 45 ✭ICCM


    Is it not the case that he does not have to pay up the shares at the time of issue, as it is a limited company his liability is limited to any unpaid amount outstanding on his shares


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    #3
    dbran
    Moderators, Business & Finance Moderators Posts: 2,094 Mod ✭✭✭✭dbran


    Hi

    That level of shareholding in a private limited company is unlikely to have any real power other then nuscence value.

    However you cannot issue shares to one group of shareholders without first offering it in the same percentage to all shareholders. ie you cannot dilute the shareholdings without first giving them a chance to contribute the appropriate amount of capital to maintain their existing percentage shareholding in the company.

    Regards

    dbran


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    #4
    mac10guns
    Registered Users Posts: 36 ✭mac10guns


    Thanks dbran ... Sorry for delay in replying was away for a few weeks.
    We do intend to notify the third shareholder of our intention and invite him to an EGM for a vote. The reason for all this relates to government regulation of our industry and the problems it causes when trying to renew licences etc.


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    #5
    J.Ryan
    Registered Users Posts: 474 ✭✭J.Ryan


    The only thing is that you need to have a purpose for issuing the shares, the courts are very hot on oppression of minority shareholdings at the moment.

    The share issue would have to be for bona fide commericial reasons, as opposed to just reducing guy 3's influence.

    I think you would need to get good legal advice from a solicitor in this area to be sure that its done right.


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