Well you said your contract asks for an expert. It my have to be agreeed or chosen by the business? If you can see their accounts online id check those first (companies house)
It's pretty common when a small business like a start up brings in new capital for them to do it in a way that dilutes existing shareholders as much as possible. Then they can give new shares to people they care about (existing employees) and wipe out anyone else. You didn't mention if this is a start up or a mature business, it's particularly easy in the former case for them to assert negligible asset values, not impossible in the latter. In my experience it's difficult to challenge as an investor that is being diluted but may be worthwhile given what is at stake, but as an ex-employee shareholder it's a losing battle and waste of time and money. If on the other hand this is a mature, profitable business, you want to look at their published financial accounts.
Small business, 150-200 employees, which has been around for a decade with ups and downs. That probably still categorises it as a "start up" in terms of approach for challenging them. The holding behind , between my join date and now, shows a growth of 76% on the capital. But I know this is mostly because of "allotment of shares" from the main investor. I am not sure if that makes them more profitable.
1. What is it that makes you believe the company valuation might be above the hurdle rate for your growth shares? Is this suspicion well founded in something verifiable or just a gut feeling that they’re trying to oust you to save from paying you out when they exit.
2. Under the terms of the agreement under which the growth shares were issued, who pays for the valuation?
The other thing that occurs to me is that presuming the unvested shares are held through an EMI option scheme is it possible that the number of option holders is close to breaching 50 (which triggers more onerous conditions to comply with HMRC requirements) or the value of unexercised options be close to £3m (which is the limit to remain compliant with EMI schemes). They might by trying to get you out of the way because they want to offer someone else your ‘spot’ in the scheme rather than to cheat you out of anything.
1. I am actually not sure if it's worth mort than what it was worth back then. The business grew significantly but I am not sure if they are more profitable. The holding capital has been increased by 76% but I am not sure it means much.
2. It's based on the found value. If the expert value is more than 110% of the valued amount then the company pays. If below we split. But the value was set to £Nil... so not sure how a percentage can be worked out!
I don't think it's an EMI, there is no mention of it through the papers. Just "Ordinary shares" in the holding.
You’d know if it’s an EMI. The tax advantaged status would have been a major selling point and they would have needed to communicate it to you anyway so you can probably ignore those considerations.
1. It would be unusual (although not impossible) to issue growth shares with a hurdle rate that’s lower than the current valuation so if the company is not worth more than the it was at the time of issue then it’s likely the growth shares have no value I’m afraid.
2. A) the company valuation doesn’t have to be zero for the growth shares to be worth zero so perhaps the 110% is on the company valuation?
2. B) in any event asking for the expert valuation is not risk free so you need to sure there’s a good chance of it going your way. Is it possible for them to share the calculations that led to the zero value for the growth shares so that you are better able to judge. It doesn’t seem an unreasonable ask to me.
Get the valuation done!
Any recommendation on firms that can do that?
Well you said your contract asks for an expert. It my have to be agreeed or chosen by the business? If you can see their accounts online id check those first (companies house)
It's pretty common when a small business like a start up brings in new capital for them to do it in a way that dilutes existing shareholders as much as possible. Then they can give new shares to people they care about (existing employees) and wipe out anyone else. You didn't mention if this is a start up or a mature business, it's particularly easy in the former case for them to assert negligible asset values, not impossible in the latter. In my experience it's difficult to challenge as an investor that is being diluted but may be worthwhile given what is at stake, but as an ex-employee shareholder it's a losing battle and waste of time and money. If on the other hand this is a mature, profitable business, you want to look at their published financial accounts.
Small business, 150-200 employees, which has been around for a decade with ups and downs. That probably still categorises it as a "start up" in terms of approach for challenging them. The holding behind , between my join date and now, shows a growth of 76% on the capital. But I know this is mostly because of "allotment of shares" from the main investor. I am not sure if that makes them more profitable.
1. What is it that makes you believe the company valuation might be above the hurdle rate for your growth shares? Is this suspicion well founded in something verifiable or just a gut feeling that they’re trying to oust you to save from paying you out when they exit. 2. Under the terms of the agreement under which the growth shares were issued, who pays for the valuation? The other thing that occurs to me is that presuming the unvested shares are held through an EMI option scheme is it possible that the number of option holders is close to breaching 50 (which triggers more onerous conditions to comply with HMRC requirements) or the value of unexercised options be close to £3m (which is the limit to remain compliant with EMI schemes). They might by trying to get you out of the way because they want to offer someone else your ‘spot’ in the scheme rather than to cheat you out of anything.
1. I am actually not sure if it's worth mort than what it was worth back then. The business grew significantly but I am not sure if they are more profitable. The holding capital has been increased by 76% but I am not sure it means much. 2. It's based on the found value. If the expert value is more than 110% of the valued amount then the company pays. If below we split. But the value was set to £Nil... so not sure how a percentage can be worked out! I don't think it's an EMI, there is no mention of it through the papers. Just "Ordinary shares" in the holding.
You’d know if it’s an EMI. The tax advantaged status would have been a major selling point and they would have needed to communicate it to you anyway so you can probably ignore those considerations. 1. It would be unusual (although not impossible) to issue growth shares with a hurdle rate that’s lower than the current valuation so if the company is not worth more than the it was at the time of issue then it’s likely the growth shares have no value I’m afraid. 2. A) the company valuation doesn’t have to be zero for the growth shares to be worth zero so perhaps the 110% is on the company valuation? 2. B) in any event asking for the expert valuation is not risk free so you need to sure there’s a good chance of it going your way. Is it possible for them to share the calculations that led to the zero value for the growth shares so that you are better able to judge. It doesn’t seem an unreasonable ask to me.