Removing a minority shareholder

[pj123]

A Thai couple I know have recently separated and are now in dispute about their jointly owned company.

The husband is a minority shareholder with 40%, the wife holds 60% between herself and her relatives.

The wife has managed somehow to dissolve/delete/remove (I am not sure what term to use) her husband's shareholding so she now has 100% control of the business. He no longer has any shares in the business.

He is now taking her to court but the question is, how could she do this without his consent?

Would this require her to change only internal company documents or would she also need to change documents lodged with the DBD?

[WhizBang]

Had a similar situitation in my own company not long after startup.

- Hired a lawyer

- Called a board/shareholder meeting. Everyone, including the bad shareholder was present.

- The company president opened the meeting and immediately turned it over to the lawyer.

- Voted the SOB out.

- Then terminated his employment.

The presence of the lawyer was to make it all legal and above board. The lawyer brought a court reporter to record the minutes.

As for the shares, they are his. All you can really do is buy them back from him, assuming his shares are legal and aquired legally. There is (should be) a book (usually held by the corporate lawyer) that lists all share issuences and who owns them, including transfers and sales of existing shares.

But since This is Thailand, your mileage may vary. It was also about 25 years ago, so the memory is a little foggy on the details.

Edited November 6, 2015 by WhizBang

[p_brownstone]

No one can "dissolve/delete/remove" someones' Shareholding in a Company unless that Shareholding is purchased by another person or entity, ergo it can not possibly be done without the consent of the original Shareowner.

What can happen - and what appears to have happened in the case you cite - is that a Director of a Company can be removed from any control over, or Administration of, the Company simply by having his / her name deleted from the "Nang Sue Rab Rong" - which is basically what in the UK one would call the Companys' Articles of Association.

The decision to remove a Director would usually be taken at a Company Annual General Meeting or an Emergency General Meeting and agreed to by a Vote by the Shareholders or Proxies present: Your friends wife, holding a clear 60% majority of the Company Shares, would obviously easily approve such a Motion and he. your friend, would be removed from any control or influence over the Company and thereafter has absolutely no recourse - so far as I can see.

Patrick

Edited November 6, 2015 by p_brownstone

[doublephil]

I have sought legal advice on similar matters on a number of occasions. My understanding is like this.

Ownership of company shares can not be legally transferred without the written consent of the shareholder and using the appropriate forms. Even if his wife is Director of the company with sole authority to sign company documents, she can not transfer ownership of other peoples shares by herself. If his shares have been transferred without his knowledge or consent e.g. by forging his signature or by corruption at the DBD office - then that is surely illegal and he can and should challenge it in the court.

If he is a Director of the company, he can be removed without his consent but not without his knowledge. A decision to remove a director must be made by majority vote at an AGM or EGM to which ALL shareholders must be invited. If he was invited but chose to not attend then that is up to him and nothing is against the law - but if there was no such meeting of shareholders or he was not invited to the meeting and he was removed without his knowledge, then that would be illegal and he can challenge it in the court.

[Srikcir]

If your shares have been transferred without your knowledge or consent, file a complaint with the police for theft. That might get you some leverage in selling your shares.

[pj123]

He has referred the matter to the courts and I understand the first hearing is in December. The wife is working on the assumption that the case will drag on for years.

[bino]

No one can "dissolve/delete/remove" someones' Shareholding in a Company unless that Shareholding is purchased by another person or entity, ergo it can not possibly be done without the consent of the original Shareowner.

Actually, it is very easy to do.

A few years ago we had a situation where a shareholder was incarcerated. We sent a series of registered letters to this person at their address as recorded in the company documents. These were returned, because the shareholder was not there to accept them.

With these returned registered letters, we were able to remove the shareholder from the company on the basis of abandonment.

The wife in the OP scenario could have done something like this, if she is still at the address and rejects the mail for her husband.

[Maestro]

For a small fee or free of charge, I can't remember which, any person can get a copy of the list of registered shareholders of a private limited company from the Ministry of Commerce, if he hasn't done so yet, for confirmation that he is indeed no longer listed as a shareholder.

[Mudcrab]

I have sought legal advice on similar matters on a number of occasions. My understanding is like this.

Ownership of company shares can not be legally transferred without the written consent of the shareholder and using the appropriate forms. Even if his wife is Director of the company with sole authority to sign company documents, she can not transfer ownership of other peoples shares by herself. If his shares have been transferred without his knowledge or consent e.g. by forging his signature or by corruption at the DBD office - then that is surely illegal and he can and should challenge it in the court.

If he is a Director of the company, he can be removed without his consent but not without his knowledge. A decision to remove a director must be made by majority vote at an AGM or EGM to which ALL shareholders must be invited. If he was invited but chose to not attend then that is up to him and nothing is against the law - but if there was no such meeting of shareholders or he was not invited to the meeting and he was removed without his knowledge, then that would be illegal and he can challenge it in the court.

Obviously not up to date with the recent and not so recent 'court' cases going on in Phuket with the English bloke and his properties and business. Seems it isn't hard to forge a signature and have a lawyer attest to the veracity of the signature. happens daily...apparently.

[SOTIRIOS]

...this is justice and fair play to these people....

...that is the only reason why we are 'welcome' here....

[p_brownstone]

No one can "dissolve/delete/remove" someones' Shareholding in a Company unless that Shareholding is purchased by another person or entity, ergo it can not possibly be done without the consent of the original Shareowner.

Actually, it is very easy to do.

A few years ago we had a situation where a shareholder was incarcerated. We sent a series of registered letters to this person at their address as recorded in the company documents. These were returned, because the shareholder was not there to accept them.

With these returned registered letters, we were able to remove the shareholder from the company on the basis of abandonment.

The wife in the OP scenario could have done something like this, if she is still at the address and rejects the mail for her husband.

There must be LOT more involved in the situation you cite - because it basically "legalises" outright theft, which is simply not possible.

Incarcerated or not, the Share Owner in your example had already paid for his Shares in the Company (in Cash or in Kind - it makes ABSOLUTELY no difference) - the Shares are therefore indisputably his Property and a thousand "Registered Letters" to him can never change that; his passivity in not responding to those letters can in no way be interpreted as his agreement to relinquishing that Shareholding.

As a mere Shareholder no-one is under any obligation to respond to communications from a Company in which one hold Shares - certainly if a Director or someone with formal responsibility for the operation of the Company one could be removed "on the basis of abandonment" because it could be demonstrated that the inaction or lack of response to Company notices caused damage to the Company.

But simply as a Shareholder - just not possible.

Patrick

[TheCruncher]

I think a few posters here confuse shareholding with being director or having right of sign in a private company.

A shareholder can not be simply removed by other shareholders.

[jimflan]

do shareholders have any liability where the director just abandons their role, and there is then nonone to sign off accounts etc and the company starts becoming liable for fines etc from DBD ?

 

[digbeth]

What can a shareholder be voted out of if he hasn't been bought out and the shares bought back by the remaining shareholders? From preferred to ordinary shares? or the rest of the shareholder just forced him to sell back the shares?

[KittenKong]

Dodgy Thai wife + dodgy Thai lawyer + forged signature + money = vanishing shares.

It has happened before here and will surely happen again.

[blackcab]

3 hours ago, jimflan said:

do shareholders have any liability where the director just abandons their role, and there is then nonone to sign off accounts etc and the company starts becoming liable for fines etc from DBD ?

 

Shareholders have a personal liability for the unpaid share capital on the shares they hold.

 

So if a shareholder owns 25 per cent of the shares of a 1 million baht company which has fully paid up shares then their liability is zero.

 

However if the shares are partly paid up at a rate if 25 per cent, then 250,000 baht has been paid and 750,000 baht remains unpaid. In the example I gave the shareholder is liable for 25 per cent of 750,000 baht, or 187,500 baht.

[blackcab]

3 hours ago, digbeth said:

What can a shareholder be voted out of if he hasn't been bought out and the shares bought back by the remaining shareholders? From preferred to ordinary shares? or the rest of the shareholder just forced him to sell back the shares?

 

Do not confuse shareholder and director. A shareholder owns a percentage of shares in a company. These shares cannot be taken away as they are the personal property of the owner.

 

A director is an agent of the company who agrees to manage the company in the best way possible. A director can be removed if the majority of the owners (the shareholders) agree to do so.