Commercial Law: Daryl & Sarah
Daryl and Sarah were equal shareholders in a company that owned four residential investment properties. Daryl had inherited his shares from his deceased fiancé, Lucy, who died tragically just over a year ago. Daryl and Sarah did not see eye-to-eye at the best of times, and Daryl felt her to be obsessive, controlling and manipulative.
Soon after Daryl inherited shares in the company, Daryl looked at the latest company accounts and saw that the rents being received by their tenants were far in excess of the expenses being claimed. He had heard through a friend that “negative gearing” could be beneficial, so took it upon himself to reduce the rents by placing new, like-minded tenants in each property owned by the company.
Sarah did not seem to appreciate what he felt was forward thinking and began acting hostile towards him, even demanding that he sell his shares to her. When Daryl refused on the basis that the price demanded was less than what he considered to be reasonable, Sarah stopped answering Daryl’s phone calls and ignored him completely.
At first Daryl wasn’t bothered by Sarah’s withdrawal. However, over the course of several months Daryl became quite worried about her. Sarah had lost a considerable amount of weight and Daryl would often see her walking out of a dodgy-looking nightclub on Sunday afternoons, looking as though she’d been there all weekend. Sarah became unable to make any business decisions and Daryl was at a complete loss as to how to deal with her.
Unfortunately for Daryl, he had never entered into any agreement with Sarah to record fundamental aspects of their business arrangement and to set out the rights and obligations of the shareholders. Daryl was especially frustrated when Sarah was uncontactable for weeks at a time when Daryl needed her sign off on the proposed subdividing and on-selling of all company-owned land.
Shareholders Agreements are known as “business pre-nuptial agreements” and can be entered into at any time. Contact the commercial team at Davenports Harbour Lawyers to discuss the benefits of a plain English Shareholders Agreement.
Nicole Duncan is an experienced lawyer who advises on a wide range of commercial matters, including business sales and purchases, leasing and employment matters. Contact Nicole Duncan at Davenports Harbour Lawyers on 9156144 or Nicole.Duncan@davenportsharbour.co.nz