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Thread: REMOVE A SHAREHOLDER OF A PRIVATE COMPANY

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    REMOVE A SHAREHOLDER OF A PRIVATE COMPANY

    THE COMPANY HAS THREE SHAREHOLDERS WHO ARE ALSO DIRECTORS, WITH SHARE HOLDING OF 40:30:30

    ONE OF THE SHAREHOLDERS OF THE 30% SHARES HAS LEFT THE COMPANY. WHAT STEPS DO THE REMAINING SHAREHOLDERS NEED TO TAKE, TO REMOVE THE SHAREHOLDER WHO LEFT AND WHAT HAPPENS TO HIS SHARE?

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    The company can buy the shares from the shareholder who has left, in which case, once the company has paid the shareholder, his shares are cancelled, so there will only be two shareholders after that.

    Or the remaining shareholders can buy the shares from the shareholder who has left.

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    Quote Originally Posted by Techno2000 View Post
    The company can buy the shares from the shareholder who has left, in which case, once the company has paid the shareholder, his shares are cancelled, so there will only be two shareholders after that.
    You need to comply with the Companies Act. Section 48 (8) (b) of the Act, stipulates that if the share buyback by the Company is for more than 5% of the issued shares of the Company, then the requirements of section 114 and 115 of the Act, will apply. This in turn means that:

    The Company will need to retain an independent expert who must prepare a report to the board (who must distribute the report the all the holders of securities), which must at a minimum address the items stipulated in section 114 (3) of the Act (this is bound to be expensive);
    The Company will not be able to implement the transaction unless the transaction is approved by the shareholders of the Company as prescribed in section 115 of the Act;

    Quote Originally Posted by Techno2000 View Post
    Or the remaining shareholders can buy the shares from the shareholder who has left.
    This is probably more doable.

    Blessing18 you also need to understand that unlike a director, a shareholder cannot be compelled to sell his shares, i.e. you remove him. You need to make him an offer that he will accept.

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    Dave A (14-Sep-21)

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    best solution

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