Dissolving Of Partnership In Pte Ltd - Advice Needed

[dnlei]

hi guys, i am of similar situation with ck.

i am a sleeping partner in a pte ltd with a partner and general partner went missing last few years. Finally made up my mind to totally put this sh*t away by ceasing the company.

@ck: i understand you approached 2 lawyers which come to a solution to wind up, what would be the est. legal fee expected for such service?
i sent my story to my cousin's legal firm and she told me it would cost 20K which is totally exceeded way off what my paid-up capital and my remaining cash balance in the corporate bank account.

@all: assuming if i just wan to break free from the company and striking my name from the registrar and can forgo any cash balance in the corporate bank account. Anyone know of the range for legal fee for handling such situations?

many thanks in advance.

Hi dnlei,

Sorry to hear of your predicament. The resident expert in this forum is Stong Eagle but I will be happy to share what I know:

The lawyers I went to were basically for consultation on the approaches that I could undertake. If they were to take over my case then, for any business entity, it will only go to the high courts and the charges ranges from 20-30K easily which is money down the drain really, more so in your case since you just want to cease the existence of this Pte Ltd.

In your case to cease the company, you can opt to do a winding up or a striking off to get struck off ACRA's records.

For winding up, there are a few types namely, Compulsory winding up (where your creditor will file to the high courts to have your company wound up to recover whatever monies that they can, unlikely in your case), members voluntary winding up (where the shareholders initiate the winding up themselves) and creditors voluntary winding up (where the shareholders know that the company is insolvent but decide to wind up the company voluntarily as liquidation of their assets will assist to pay back the debts owing to the creditors). Hope I remembered the above correctly.

For a simpler and costs effective method, you may opt for a striking off instead. A company can be struck off once it is in a state of no net assets and liabilities. Thus, you will require your books to be balanced etc before filing to ACRA. I believe for your case, this is the most costs efficient approach. Of course, I believe to initiate this proceedings, you will need to call a AGM and have a 75% vote in favour of this motion thus you will need to consider the shareholding allocation in your company to achieve this especially if your partner is MIA.

To get your name off the registrar for this company, you will be required to resign from the company and some official documents will need to be signed and endorsed by all shareholders/directors of the company I believe. Since your partner has been MIA, I m not sure how you intend to resolve this. You can feed us more info for us to advise you further.

Hope the above can aid you in your decision making.

Thanks ck.

I do not have any/much info with regards to the business to make a proper accounting/books to be balanced in order to fill them to the ACRA.
What i have are some paperworks/transactions records and the MIA partner particulars.

I do not know what i should do when there is only me and the other MIA partner in the co.
I couldn't reach him at the contact number and wonder if i should go find him in person via the address on his NRIC.
Also i rem signing some empty checks before(years back), is it possible to approach the bank to freeze the corporate account ?

And in cases that i couldn't find him, will i be in any possible debts if i leave things as it is?

[Kkfighter]

Hi ck and strong eagle,

Some questions on buying over my partner share of 40% in Pte ltd. I am holding 60% and is the one managing this business.
Which lawyer to recommend, and what is the cost involved?
is the spilt based on the latest year financial statements profit figure? Meaning I just need to return him 40% from the recent year profit plus his capital ?

However, last yr we bought some gold and incur some loss in this investments.
Though based on the financial statement it is still profit after minus the value of the "loss " value in gold.

So do I need to return him 40% frm the profit and the 40% value in gold?

Or just the profit of 40% from the recent financial statements ?

[Strong Eagle]

Hi ck and strong eagle,

Some questions on buying over my partner share of 40% in Pte ltd. I am holding 60% and is the one managing this business.
Which lawyer to recommend, and what is the cost involved?
is the spilt based on the latest year financial statements profit figure? Meaning I just need to return him 40% from the recent year profit plus his capital ?

However, last yr we bought some gold and incur some loss in this investments.
Though based on the financial statement it is still profit after minus the value of the "loss " value in gold.

So do I need to return him 40% frm the profit and the 40% value in gold?

Or just the profit of 40% from the recent financial statements ?

First, you do not need a lawyer to conduct this transaction. This is a sale of shares between two private parties, and you all need is a sales agreement stating what is being sold/bought, how much, and when the sale is effective.

Once you have concluded the sale you will update shareholder particulars at the ACRA using the Bizfile facilities. That concludes the transaction.

Your company’s memorandum of incorporation may include language that says a directors resolution is required to approve the sale of company stock to another person but since you are the 60 percent shareholder and are buying the stock, this is only a formality.

The real question you are asking is: What is a fair value for the share price? There is not a simple answer to this question.

One way to compute the share price is to base it upon the actual asset value of your company. For example, you have a total of 10,000 shares outstanding. Your partner has 4,000, you have 6,000. Then:

Assets
Cash in Bank: $10,000
Accts Receivable: $5,000
Equipment: $5,000
Total Assets: $20,000

Liabilities
Accounts Payable: $10,000

Net Value of Company = Assets – Liabilities = $20,000 - $10,000 = $10,000

Then your partner’s shares would be worth $4,000.

I would not base your share value on paid up capital by the shareholder. For example, each of you could have put up $5,000 as paid up capital, but the first thing you did was spend $8,000 on office space, advertising, etc. So, the total assets would be only $2,000. Why would you pay him his total investment?

Many larger companies have a share price much larger than their actual asset value. For example, Google has a much higher share price than the sum total of all its computers and buildings. The share value is based upon two things: Earnings, and future potential.

Let’s say a company had ten thousand in earnings, or one dollar per share. If the shares were worth $10, then that would be a ten percent return to the shareholder, which might or might not be a good rate of return depending upon the kind of company it is. But the actual asset value might only be $2 per share.

Share price based on future potential means that people think that the company will earn a lot more or grow a lot more in the future and are willing to make a higher bet now to get in on the game. That’s why companies like Facebook, which actually has zero earnings, was able to launch with such a high share price… people thought it was going to be the next Google or Amazon.

But for a small company, this usually doesn’t apply, unless of course, you have some kind of patent or some kind of secret that is going to make lots of money in the future. So usually, the agreed upon price is somewhere around asset value, or perhaps a percentage of earnings with the percentage being larger than what you could get with a CD or other financial investments.

In reality, because you are the 60 percent shareholder, you don’t really have to buy anything back. You have an absolute majority to make decisions in the company, and so long as you don’t issue dividends, in which your partner would get to participate, your partner actually makes no difference at all.

If, on the other hand, you are trying to be fair, and let him out of the deal at a reasonable price, then figure out the lowest amount that would be acceptable to him.

[A1234567]

Hi , sorry to dig this old post.

Just want to seek some advice. I have a company with one of the business partner . Initially we started with 50/50 of the shares. However I found that he have allocate the company shares to 80% for himself and 20% for me. I have always let him run the company as I am the sleeping partner. I only found out of the changes when one of the potential client request for the updated ACRA file. Is this consider fraud ? Any kind advice

[Myasis Dragon]

Hi , sorry to dig this old post.

Just want to seek some advice. I have a company with one of the business partner . Initially we started with 50/50 of the shares. However I found that he have allocate the company shares to 80% for himself and 20% for me. I have always let him run the company as I am the sleeping partner. I only found out of the changes when one of the potential client request for the updated ACRA file. Is this consider fraud ? Any kind advice

Shares don't get "allocated". They are purchased by shareholders. Shareholders can purchase shares for money, for equipment, for buildings, for intellectual property, or for labor.

So, for example, you and I might agree that I will get 50 percent of the shares for investing the money, and you will get 50 percent of the shares for doing all the work to setup the company. ACRA Bizfile will show that each of us is a 50 percent shareholder.

Now, here is the main point. These shares are yours. They cannot be taken away from you. They have been "purchased" by you. So, nobody can "allocate" your shares away from you. You can only agree to sell them, either to your business partner or to someone else.

Now, a lot of times companies will be formed with more shares than are actually issued. This is so that a company can issue more shares in the future to raise more money. BUT, these shares cannot be issued without approval of all shareholders. But since both of you are 50/50 shareholders and since you did not approve, no additional shares can be issued.

Therefore, your partner is full of shit, and yes, what he is trying to do is fraud.

I would make it clear to him that unless he has purchased your shares from you that the share partnership remains at 50/50. This is important to you because at 50/50 both of you must agree on company decisions... at 80/20, he can do whatever he wants.

Any such shareholder changes would also require notice of an AGM or EGM, then a vote on a resolution of the changes by the shareholders, then filing this with Bizfile at ACRA. Make it clear to him that you will first report him for fraudulent updating of Bizfile records. Your only other choice is to pursue this as a civil matter in court.

Sounds like a terrible person to have as a business partner. Good luck.

[A1234567]

Hi M.Dragon, many thanks for your advice.will make the decision soon.