NSW Shareholder rights if a company is being invested in

[Rob Sol]

Hello,

I have been working for a very small Pty Ltd company (Company A) over the past year in exchange for around 15% of shares in that company.

The company I have the shares in has found an investor (Company B) who is asking for a significant number of shares in Company A in order to make a financial investment.

My question is, what rights do I have as a shareholder? Would the Company B have to pay me out or honour my shares? Or can they simply be dissolved

Thanks in advance Rob

 

[Rob Legat - SBPL]

Your shareholding can't be dissolved - but it can be watered down. It depends on how Company B comes by their shares.

If they are transferred existing share capital, it won't affect your existing rights at all.

If new shares are issued, it will change your overall proportion of the issued share capital. For example, say that currently there are 100 shares of which you own 15 (15%). If 50 share are issued to Company B, and you retain your 15, your proportion will drop to 10% (15/150).

In terms of having to pay you out, the threshold for compulsory acquisition is 90%. This can be a complicated area. You might want to have a read of ASIC's regulatory guide on the matter: http://download.asic.gov.au/media/1259750/rg10-published-21-june-2013.pdf

 

[Rob Sol]

Thanks for your reply Rob.

I'll be in touch should I need any help.