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CaseLaw
CaseLaw, Attorney
Category: South Africa Law
Satisfied Customers: 1534
Experience:  BCom; LLB; Masters in Law
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I am the 30% owner of a property management / real estate

Customer Question

Hi,
I am the 30% owner of a property management / real estate agency, CompA. I have been working on a possible partnership between my company and another real estate company, CompB, with the view that it would greatly benefit both. Without going into detail of the proposal, I sent a proposal to my 70% partner detailing the proposed conditions of the partnership, to which my partner took great exception and is now under the unfounded delusion that this is in fact some sort of attempt to steal the business from him. This couldn't be further from the truth, however this has now destroyed our relationship to the point where he is seeking legal and financial advise. I can only imagine in an attempt to end my role in the company. In light of this I'd like advice on the following...
1. Have I done anything wrong by engaging with CompB? I have provided certain information pertaining to our agents earnings for forecasting reasons.
2. As we, CompA, do not have any shareholder agreement, only our registered shareholdings, have I acted wrongfully?
3. As the partnership proposal was sent to my partner before discussing with CompB, but information was given out to a third party, have I acted wrongfully?
4. Am I within my rights to pursue the partnership within my personal capacity and CompB? By way of looking to work with CompB not in my capacity of shareholder / principle agent of CompA.
5. Should I remain shareholder and principal agent of CompA, is there a conflict of interests with working with CompB?
6. Should I remain shareholder and principal agent of CompA, am I within my rights to use information acquired through CompA to benefit CompB?
7. Should I elect to sell or arrange an agreement to hand back my shares in CompA, would I then be able to pursue my / CompA's clients through CompB?
Any advice you could offer would be greatly appreciated!
Submitted: 1 year ago.
Category: South Africa Law
Expert:  CaseLaw replied 1 year ago.

Hi there and thank you for your question,

1. Have I done anything wrong by engaging with CompB? I have provided certain information pertaining to our agents earnings for forecasting reasons. --> If you are only a 30% shareholder in CompA, there is nothing wrong with you engaging CompB to form a partnership, however I am of the view that you should have obtained your co-shareholder's permission before sending out the financial information. Not having obtained the permission could lead to a break-down in the trust relationship with your co-shareholder.

2. As we, CompA, do not have any shareholder agreement, only our registered shareholdings, have I acted wrongfully? --> Lots of companies don't have a shareholders agreement. Not having one will mean that your rights, duties and obligations will need to be proven each time you go to court, instead of being able to rely on a document. See answer above.

3. As the partnership proposal was sent to my partner before discussing with CompB, but information was given out to a third party, have I acted wrongfully? --> Your co-shareholder should have come back to you to say YES or NO in relation to the proposal. The fact that he didn't come back to you speaks volumes. You shouldn't have given out the financial information without his consent. Do you owe your co-shareholder a duty to keep private information private? I would say YES. That means that you have acted wrongfully.

4. Am I within my rights to pursue the partnership within my personal capacity and CompB? By way of looking to work with CompB not in my capacity of shareholder / principle agent of CompA. --> I would say that while you are a shareholder of CompA, you owe the company and your co-shareholders a duty NOT to be a member of another company (e.g. CompB) that offers the same or similar services. If you want to be a shareholder of CompB, my suggestion would be to sell your shares in CompA to your co-shareholder, and then buy shares in CompB. In that way there will be no breach of any duties.

5. Should I remain shareholder and principal agent of CompA, is there a conflict of interests with working with CompB? --> I think that there would be a conflict!

6. Should I remain shareholder and principal agent of CompA, am I within my rights to use information acquired through CompA to benefit CompB? --> No, not really. Typically this information is considered to be confidential information which belongs to CompA. It is not "your" information. It belongs to the CompA. By taking it for CompB's benefit, you are committing a breach of the confidential information.

7. Should I elect to sell or arrange an agreement to hand back my shares in CompA, would I then be able to pursue my / CompA's clients through CompB? --> YES. That's what I've suggested that you do.

If my answer hasn't answered all of your questions, please send me a REPLY with follow up questions so that I can continue to assist you in this same thread for as long as you need. Let me know if you need more advice - don't just rate my answer as "bad".

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Good luck and best regards,

CaseLaw

Please note: This answer does not create an attorney-client relationship. Please consult a local attorney in person for legal advice. This information is being provided so you can better discuss legal matters with your attorney.

Expert:  CaseLaw replied 1 year ago.

Hi there again,

I hope that you understood the above advice and that it was useful? Please leave positive feedback for me.

If you have a further question please ask it?

Regards

CaseLaw