Share Value/Compensation

J

Jayb1

New Member
Jurisdiction
California
I am a shareholder of an incorporated construction business with 3 other people, I own 17%, the majority owner owns 51%.
After a recent argument, the majority shareholder/owner fired me via email.
He says the company will buy back my shares at the current valuation of the companies assets and projected earnings for the year, he projects around 30k
I initially invested 20k a few years ago, the company has grown quite a bit and takes in a couple of million in sales each year which I feel I have contributed to a lot.
I don't want to have a long term falling out but I also want to get the best value back
We did not initially draw up anything for this situation like we should of as we never thought this would happen.
I just want to know my options, we will have to go to lawyer to do paperwork but I want to get a better idea of my options first since this is not being dictated by me, I've been left with no assets, as company owns everything
 
You are going to need to get a business valuation done. That is an involved and costly process, but you're going to need to do it to have any idea of the real value of the company.
 
Jayb1 said:
I just want to know my options, we will have to go to lawyer to do paperwork but I want to get a better idea of my options first since this is not being dictated by me, I've been left with no assets, as company owns everything
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The BEST legal guidance isn't obtained for FREE, as in anonymous internet guidance.

You serve YOURSELF best by hiring a lawyer to protect your alleged interests.
 
Zigner said:
You are going to need to get a business valuation done. That is an involved and costly process, but you're going to need to do it to have any idea of the real value of the company.
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Thank you, right now he is telling me the valuation, is he legally obligated to get it done professionally, I don't want to drag it out
Is it based solely on physical assets or do I get compensated for the value I added as such
 
army judge said:
The BEST legal guidance isn't obtained for FREE, as in anonymous internet guidance.

You serve YOURSELF best by hiring a lawyer to protect your alleged interests.
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I understand and most likely will once iam given the official offer, I am trying to gauge where iam at now before we go down that road, my ex partner is/was a friend so don't want to go down the road of a bitter legal battle over say $20k
 
Jayb1 said:
Thank you, right now he is telling me the valuation, is he legally obligated to get it done professionally, I don't want to drag it out
Is it based solely on physical assets or do I get compensated for the value I added as such
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Unless addressed by the corporate bylaws, he is entitled to arrive at a value in any way he wishes (as are you). He's already arrived at his number, now you have to arrive at yours.
 
Jayb1 said:
Thank you, right now he is telling me the valuation, is he legally obligated to get it done professionally, I don't want to drag it out
Is it based solely on physical assets or do I get compensated for the value I added as such
Click to expand...

What value you, he or the mouse in the basement added only adds to the overall value of the entity. Who added the value means nothing.

The 51% owner has set the value of the business. If you don't agree with that value it will be up to you to prove the value. That will likely have to be done by a professional.
 
Also, I don't have to sell my shares back right ?
I understand he could then make sure there is no profit my pumping everything back into business so I don't get a dividend, he won't either but I believe if he can still pay himself bonuses to bypass this as he is on the payroll, correct ?
 
Jayb1 said:
Also, I don't have to sell my shares back right ?
I understand he could then make sure there is no profit my pumping everything back into business so I don't get a dividend, he won't either but I believe if he can still pay himself bonuses to bypass this as he is on the payroll, correct ?
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Unless the company declares a dividend or sells the shares of stock have very little value to you. It would be entirely legal for the entity to pay those working there (including or even only the 51% owner) a bonus each year equalling the profit of the entity.
 
Jayb1 said:
He says the company will buy back my shares at the current valuation of the companies assets and projected earnings for the year
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Is this consistent with the corporation's by-laws and the shareholder agreement? Maybe you don't have a shareholder agreement, but I'm hard-pressed to believe the corporation doesn't have by-laws.

Jayb1 said:
I just want to know my options, we will have to go to lawyer to do paperwork but I want to get a better idea of my options first since this is not being dictated by me, I've been left with no assets, as company owns everything
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No assets? You don't own any clothes or a car or...?

In any event, determining your options requires looking at the corporation's governing documents and knowing all of the relevant facts. That said, it's possible that the corporation has no ability to compel you to sell your shares.

PayrollHRGuy said:
What value you, he or the mouse in the basement added only adds to the overall value of the entity. Who added the value means nothing.
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Concur.

Jayb1 said:
I understand he could then make sure there is no profit my pumping everything back into business so I don't get a dividend, he won't either but I believe if he can still pay himself bonuses to bypass this as he is on the payroll, correct ?
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He could do those things, but the majority shareholder of a corporation owes fiduciary duties to the minority shareholder, so doing those things could give rise to a very expensive lawsuit by you against him.
 

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