[Question] Selling 50 % members interest in a CC

[mjjj]

Hi,
I need some sound advice. I am a member in a CC with 50% members ineterest. The CC is held by 2 individuals, however I am wanting, for personal reasons to sell my interest. I have been told that in order to do this, I must in accordance to the law, advise and offer my interests to the other member.

I have discused and offered my interests and the other party has in princial agreed to purchase my 50%. The problem comes in with regards to an agreement on the pricing thereof. If a pricing / repayment structure can not be agreed to, can I offer my 50% to any other party ?

Obviously if I was to offer to an alternative party, the books, customer lists, pricng etc would all have to be offered to the party in order for an evaluation to be made. Do I need permission from the other member in order to do this ?
If permission is required, then am I between a rock and a hardplace, in other words, will I have to agree to the terms conditions and pricing offered by my coleague ?

[Dave A]

The practical issues go beyond just law. Generally a 50/50 partnership really needs a pretty solid co-operative working relationship between the members - and that would apply to any prospective buyer coming in to the cc too. Without a partnership buy/sell agreement in place, how far is any deal going to go if you've got to force ownership issues?

One way of possibly solving a valuation "conflict" if that is where you get snagged is to sell one percent to your existing partner at a bargain basement price and 49% to the external buyer for as much as you can realise. That might also help put the value of your share in perspective.

I'd also expect your soon-to-be ex-partner would want a solid partnership agreement in place with the new member (and so should your buyer).

[Peace]

As far as I'm aware - It depends on what is covered in the founding statement.

[mjjj]

Dave,
Thanks. The relationship between the members is very good and strong, and thus far in principal, the other member has agreed to purchase the shares / interest - this is not the problem. In principal, the value of the 50% would lie in what the market would want to pay, however if the payment options offered by the other member are not acceptable to me, can I go in to the market with my shares ? I think that the founding statement is very unclear on the issue, as when the CC was formed, we were gung ho and naive to what the future may bring. The business has since become quite a big animal, and we now, from a SARS and banking perspective fall outside of the "SME" catagory. Am I at liberty allowed to seek alternative buyers with payment terms that would best suite my pocket ? If so, am I allowed, without permission, to divulge the financials ofthe business ?

[Dave A]

can I go in to the market with my shares ? I think that the founding statement is very unclear on the issue, as when the CC was formed, we were gung ho and naive to what the future may bring.

Normally the case. And if it was covered, you wouldn't be here asking the questions.

Am I at liberty allowed to seek alternative buyers with payment terms that would best suite my pocket ? If so, am I allowed, without permission, to divulge the financials ofthe business ?

If you are not restrained from selling the share elsewhere in terms of your contractual obligations with the other member/s, then there is nothing preventing you from seeking to sell your share elsewhere.

However, I'd take a close look at what does need approval from existing members. This could easily include approval of any share transfers and disclosure of sensitive information.

[Yvonne]

From my personal point of view, I think you need to keep the desired end result in mind, you will be walking a minefield with regard to the potential of a dispute with your partner, especially as you are talking about customer lists, pricing etc. which could prejudice his best interests.

I would suggest that you contact someone by the name of Mark Corke of a business brokerage Suitegum - for an independant valuation and advice.

Yvonne