Am I allowed to remove a shareholder from my limited company without notifying them?

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Hello, I’ve got a question. We’ve had it up to here with one of our fellow shareholders, and we’d like to remove him. Can we do this without telling him, or does he need to be involved in the project? We’d obviously like to be rid of him as simply as possible, thanks.

Answers

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No, you cannot remove a shareholder without telling them. Even then, it can be difficult to remove a shareholder from a company unless they agree to sell you their shares.

However, if the individual in question is a minority shareholder (they own 10% or less of the company’s issued shares), you may be able to implement the “squeeze-out” provision in the Companies Act 2006 (Chapter 3, sections 974-991).

To do this, you must first offer the shareholder a reasonable price for their shares. If they refuse, you simply set a fair value for the shares and purchase them yourself. The minority shareholder can either accept the sale value or take you to court to try to prove that the purchase price was unreasonable.

Ideally, try to avoid this wherever possible and attempt an amicable transfer of shares.

Summary of ‘Squeeze-out” provision http://www.legislation.gov.uk/ukpga/2006/46/notes/division/10/28/10/8

a year ago
 

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