QLD Company Title Property Sale/Conveyancing

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16 March 2019
The Articles of Association (AoA) for our company title property state that all Directors must agree to sell the company.

Late last year, one Director voted against selling the company to an unnamed buyer as the structure of the proposed sale was - in that Director's opinion - not in the interests of the whole company in the long term.

In brief, the company Chair negotiated a clandestine deal with a buyer's agent whereby he would sell his shareholdings (at a heavily discounted price) to an unnamed buyer using a standard real estate contract and receive a cash settlement in 30 days. Under the terms of that deal, the remaining Directors would then be locked into a contract with that same buyer but would not receive their settlement until a further 11 months down the track. There was no negotiating the terms agreed between the Chair and the buyer's agent, no certainty that the contract would ever reach settlement, ad valorem stamp duty and company tax implications for the remaining Directors, a conflict of interest having a property developer as a future Director etc etc. The Chair announced the deal on December 10th and stated that the contracts had to be drafted and signed before Christmas Eve. A somewhat unrealistic timeframe given the complexity of share sale agreements and time of year.

The Director who opposed that particular sale is not at all opposed to selling the company provided that the sale structure and contractual Ts & Cs are fair and equitable for all Directors. It should be noted that other Directors had only agreed to the deal in principle and some rescinded that agreement when advised that the terms were nonnegotiable.

The Chair now wants all of the Directors to sign a legally binding document - separate to the company's AoA - that commits them to sell the company provided that some minimum terms (such as price, settlement duration etc) are met by the buyer. Previously, such terms have been discussed and agreed at a meeting of the Directors as and when offers have been received.

It seems that the intent of the proposed document is to remove a Director's rights - under the AoA - to vote against the sale of the company if they do not believe it to be in the company's interest. The Chair seems to have the expectation that the other Directors will sign this document on the spot without seeking independent legal advice. I am of the view that a company title lawyer should first review the document in conjunction with the company's AoA, ASIC regulations and the overarching Companies Act. Interested to hear your thoughts on the matter.

For context - over the last five years, there have been several sale contracts signed with different buyers all of which have fallen through prior to settlement.

Company title property conveyancing - while common in Sydney - is rare in Queensland and finding a lawyer with that specialist knowledge is proving tricky.