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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 23067
Experience:  38 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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I am a shareholder in a company which owns a block of land

Customer Question

Hi, I am a shareholder in a company which owns a block of land on Waiheke which has been turned into an intentional community. I want to sell my share in the company and have found a buyer. However, a couple of people the community of the company do not like the prospective buyer and want to block the sale under consensus, which is the decision-making process used in business meetings. Can they do this? The dislike is based on personality moreso than anything more concrete. I want out and to date this is the only prospective buyer I have. Thank you, Susi
Submitted: 1 year ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 1 year ago.

You will need to look at the shareholders agreement and the articles of the company to see what happens where consensus cannot be reached. Usually in a small company, where shares are sold they must first be offered to existing shareholders, but if they decline then the right to sell to others is available. But the right to veto like this, should come with an alternative where they dont approve of your purchaser. If the agreements are silent, you can still transfer the shares under secion 86 of the Companies Act but this would likely get difficult because they may not permit this person to use the land and it could get messy. An alternative may be to ask the shareholders to enter into mediation with you, at which the issues could be openly discussed and your options discussed

Customer: replied 1 year ago.
Hi - there is no process for when consensus is not reached. Anyone can block consensus. Regarding the sale, the company has its own process and shares are offered for sale externally, not internally. An alternative to just blocking the sale has not been offered as yet.
Expert:  Chris The Lawyer replied 1 year ago.

Is mediation an option? In that you can explain the problems which you will have if you cannot sell, as well as further discussing why your purchaser is not acceptable to them.

Customer: replied 1 year ago.
I can do that but it does not detract from the fact that a company shareholder can block the sale and there is no other decision-making process that can be used (although the constitution mentions voting) as a fallback should consensus not be reached.
Expert:  Chris The Lawyer replied 1 year ago.

The Companies Act does not provide any remedies. In certain exceptional cases a forced purchase can be made but it doesn't apply to your situation. A well drafted shareholders agreement should provide for this but I assume yours does not. It is not an unusual situation, but I guess when the rules were set up for your company no one thought about the possibility of your situation. I would suggest remedies if you had them.

Customer: replied 1 year ago.
Hi - have just found this https://sites.google.com/site/awaawaroaecovillage/home/village-guidelines which does spell out what happens when consensus is not reached, and the rules around buying and selling a share.
Expert:  Chris The Lawyer replied 1 year ago.

So if consensus cannot be reached this clause applies

"For an ordinary meeting the fundamental decision making process shall be via 'consensus' of all the shareholders attending the meeting. If consensus cannot be reached at the meeting a further meeting will be held to try and resolve issues in order to reach consensus. If consensus still cannot be reached the decision can be deferred to a Resolution Meeting. At the resolution meeting a vote by directors shall be taken. A majority of 80% of the directors or voting shareholders as defined under B) & C) above, shall be required to pass a decision."

So you need to push this to a resolution meeting

Expert:  Chris The Lawyer replied 1 year ago.

But if you dont get the majority, then you have a problem

Customer: replied 1 year ago.
Hi Chris, I would like to get back to you after a meeting we are having on Monday, so can I keep this conversation going, albeit parked to one side for the time being? Thanks!
Expert:  Chris The Lawyer replied 1 year ago.

Sure