Joe is a company director in a proprietary company. He is proposing to put a resolution...

Joe is a company director in a proprietary company. He is proposing to put a resolution to his company that it buy out the smaller holdings. Joe reasons that there are a number of quite large shareholders and many of the smaller members have little interest in the company. Joe doesn't want to force any member to sell their shares but would like to clean up the register by buying out the smaller holdings.

Required:advice Joe on the legal implications of his plan.

Expert Solution

Buyback of certain shares from shareholders can only be done after the true consent of such shareholders.
Further if the shareholders agrees, the company can buy back such share holdings and cancel the name of such share holders who sold their holdings to the company.

In the given case,

Joe is a company director in a proprietary company. He is proposing to put a resolution to his company that it buy out the smaller holdings. Joe reasons that there are a number of quite large shareholders and many of the smaller members have little interest in the company. Joe doesn't want to force any member to sell their shares but would like to clean up the register by buying out the smaller holdings.

Joe as a director can only clean up the register when the smaller members of the company fullu agrees to sell their holdings to the company.

Legal implications would be :

fully paying shareholders for their holdings.
such holdings can be purchased only after the true concent.
cancellation of the name of shareholders from the company's register.

ekkarill92 answered 2 years ago

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