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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 22894
Experience:  38 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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I was a 1/6 share holder in a company. I put in $100,000

Customer Question

I was a 1/6 share holder in a company. I put in $100,000 plus time at an agreed rate for $50,000. The company was a property development company with the main assets were a property and a planning consent which cost $300,000 for a new large project that increased the value of the property. At that time the property market weakened and the company was forced to sell the property by the bank to repay the mortgage. The property was sold to 4 of the 6 shareholders, at a low price, reflecting the money that each party had contributed, however this was not proportional. I was not given any money or shares in the new company from the sale. The new company has proceeded to develop the property in line with the planning consent. Please advise on my legal position for recourse.
Submitted: 1 year ago.
Category: New Zealand Law
Customer: replied 1 year ago.
also note that I was not a director so could not make decisions, and the two directors put together a favourable deal for themselves
Expert:  Chris The Lawyer replied 1 year ago.
If the other parties will not provide any compensation then you may need to sue. This could be a breach of fiduciary duties, if they have taken advantage of the companies weak position to take the development at a low price. You would however need to bring a claim in the High Court to see if they will pay your share out. However your losses may be limited to the position when you invested and taking into account your risk. It wouldnt be a simple case to argue and you would need an experienced lawyer
Customer: replied 1 year ago.
Would it not be straight forward to argue that I received no compensation and others did, from a legal perspective?So I would sue the directors based on fiduciary duties and would they be personally liable or would the assets of the company be returned and redistributed so to speak
Expert:  Chris The Lawyer replied 1 year ago.
The claim would be for your losses, which would mean a calculation based on the risks and then what they stand to make from the development. Thats not quite the same but is the remedy the court would make if you were sucessful
Customer: replied 1 year ago.
okay, can you also advise on the specific questions:Would it not be straight forward to argue that I received no compensation and others did, from a legal perspective?So I would sue the directors based on fiduciary duties and would they be personally liable or would the assets of the company be returned and redistributed so to speak
Expert:  Chris The Lawyer replied 1 year ago.
The issue of compensation in the new venture would be an internal arrangement between the other directors. Your losses flow from the fact that they took advantage of the transaction and the planning consent, which more properly belong to the first company. So the concept of the development together with the planning consent was actually worth something, and they have apparently assumed that they can just put this into the new company. As directors of the old company they owe fiduciary duties to the shareholders, and the breach of those duties is the taking of the assets of the company and placing them on the new venture without taking into account your position. They would be personally liable

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