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EXIT CLAUSE FOR A GROUP MEMBER????????????
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georgeo
#11 Posted : Monday, September 20, 2010 10:28:53 PM
Rank: Hello

Joined: 9/20/2010
Posts: 1
Location: kenya
Georgeo has some advice. Assessing the groups networth to calculate each members value in a group is a good start. This should be done annually (and preferably during AGM's). The best protection against unexpected eventualities such as death is insurance. Your group can then talk to a good agent who will quote premiums for each member whose sum assured will be his/her estimated networth in the group. Members will of course have to appoint beneficiary next of kins.

Secondly, I figure most group members have a close knit friendship history and so the adding last respect clause to take care of any possible funeral expenses can be appended to the life policies at a very small addition to the premium.

Seek legal advice on the best approach to use on Exit clause for a group member who is pissed at all of you and simply wants OUT!smile
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mukiha
#12 Posted : Wednesday, September 22, 2010 10:51:10 AM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
My 2 cents wrote:
mukiha wrote:
@jiji; Don't make matters more complicated than they are.

You are SHAREHOLDERS in a limited company. If one os the shareholders dies, his/her heirs inherit the shares according to his/her will. The shares he/she holds are just part of his wider properties.

His/her death shall not intefere in the running of the company in any way (unless he/she is the brains behind the enterprise!!!)

Ask yourself this: you have shares in KQ, what will happen when you die? Your heirs will inherit the shares, and decide whether to sell them or to keep them for future dividends.

If they decide to sell, they will NOT sell back to KQ! They will go to NSE and sell to the highest bidder.

You company must have a rule on the selling of shares by existing shareholders; doesn't it? E.g. many companies provide that a shareholder cannot sell to an "outsider" without first offering to the existing members.

In such a case; it is the existing members (as individuals) who offer to buy the shares - NOT the company them buying back!

In a nutshell; if a member (shareholder) dies, his/her heirs simply inherit the shares and the company goes on as if nothing has happened.

Not workable. Most of these investment groups thrive on association and were formed the same way(either friendship, relatives, colleagues etc). It is like a club. You may not like to associate with whomever might be in line to inherit; and they too may not want to associate with you. You cannot directly compare these clubs to publicly listed companies.

@My2cents; Look at the original post by @jiji:
Jiji wrote:
I belong to an investment group which has been in existence since 2006. The group is doing quite well and we have investments in Real estate and also in stocks and bonds. we incorporated a company in 2008 which is our vehicle for investment currently. We are having a serious problem of coming up with an exit clause incase a member dies.. how do we pay his/her benefeciaries since some of our assets are not very liquid? Any one please advice

They have "incorporated a company". I understand that to mean that they have a LIMITED company under the Companies ACT.

If they wanted to operate as a CLUB, then they should register one under the Societies Act.

Under the Companies Act, the shares of a dead member will simply go to the members heirs. That transition does NOT change the company and the surviving members CANNOT restrain the heirs from participating in the company as full shareholders. You cannot lock them out from shareholders meetings etc
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Mpenzi
#13 Posted : Wednesday, September 22, 2010 10:57:36 AM
Rank: Veteran

Joined: 10/17/2008
Posts: 1,234
@Jiji,
you should all sign up a shareholders' agreement providing how the shares of a deceased member are to be dealt with. usual provision is to have the heirs of the deceased sell the deceased's shares to the other members of the company after a valuation of the company has been done.
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mukiha
#14 Posted : Wednesday, September 22, 2010 10:57:59 AM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
...if the surviving members do not want to associate with heirs of the dead member; they can offer to buy the shares as individuals. Unfortunately, the heirs might not be willing to sell!!

The company may also offer to buy the shares back, but that would require a resolution at a General Meeting of all shareholders (including the heirs of the dead member!!!). Depending of the shareholding [percentage] they have, the heirs might block such a resolution from going through!!!

Thirdly, the surviving members may then offer to sell their shares to the heirs and get out of the company. But the heirs may be unable or unwilling to buy. In which case the surviving members could sell to "outsiders"... thereby losing a company that they spent time building!

Moral of the story: don't rush to form a limited company while what you really need is a CLUB!!
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Mpenzi
#15 Posted : Wednesday, September 22, 2010 11:03:56 AM
Rank: Veteran

Joined: 10/17/2008
Posts: 1,234
mukiha wrote:
...if the surviving members do not want to associate with heirs of the dead member; they can offer to buy the shares as individuals. Unfortunately, the heirs might not be willing to sell!!

The company may also offer to buy the shares back, but that would require a resolution at a General Meeting of all shareholders (including the heirs of the dead member!!!). Depending of the shareholding [percentage] they have, the heirs might block such a resolution from going through!!!



Like as I stated above the members of the company can agree that when any of them dies, the heirs of his/her estate SHALL sell his/her shares to the other members. Only when the other members are not able or willing to buy the shares are the shares to be offered for sale to outsiders.

@Mukiha
Kenya's company law does not allow for share buybacks.
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kyukkamba
#16 Posted : Friday, October 15, 2010 2:00:42 AM
Rank: Member

Joined: 5/28/2010
Posts: 151
......They have "incorporated a company". I understand that to mean that they have a LIMITED company under the Companies ACT.

If they wanted to operate as a CLUB, then they should register one under the Societies Act.

@MUKIHA
Can you kindly advice what is the diff. between the 2 (forming an LTD Co. or Reg. under Societies Act) what r the tax implecation?
Ni Uhuru wa Mbesha...Niguo kana tiguo?
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mukiha
#17 Posted : Wednesday, October 27, 2010 10:23:09 AM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
kyukkamba wrote:
......They have "incorporated a company". I understand that to mean that they have a LIMITED company under the Companies ACT.

If they wanted to operate as a CLUB, then they should register one under the Societies Act.

@MUKIHA
Can you kindly advice what is the diff. between the 2 (forming an LTD Co. or Reg. under Societies Act) what r the tax implecation?

In terms of taxation, there is no difference; both pay 30% of taxable income.

Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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