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My brother and I each own 50% of a company. How do I remove him?

He barely ever comes to work and performs none of his job responsibilities. He does not own any other properties, he is just a 50% shareholder of the company and I own the other 50%. Can I get rid of him without having to liquidate the company?

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5

I have to assume that you have no partnership agreement, and therefore no standard buy/sell clause, which would force the issue. You cannot force anyone to sell their shares, and it is particularly sensitive in your case, because you are dealing with a close family member. The first thing you need to do is get a valuation for the company from a professional business valuator. If you want an approximation of what the business is worth than just Google sites that provide free basic valuation tools. With facts in hand, offer your brother a fair market price for the 50%. This may be accompanied by a formal letter specifying why the sale of his shares would be a win-win deal for both of you. It seems that you are the active partner and your brother is a passive investor. Persuading him to sell should not be that difficult, as long as he sees that he is getting a fair deal.

If you have already tried to persuade your brother but were turned down, then I would force the issue by bringing in an impartial arbitrator, who can act as an unbiased go-between.

You expressed your reluctance to liquidate the business, but if you can't work together or come to a fair deal, this may still be the best course of action; and then you can each go your own way

4

Hi Tanya,

Your shareholders' agreement should outline the rights and obligations of each shareholder in the company to help simplify the process of cutting ties with an equal or majority shareholder. However, since you are asking this question, it is likely you don't have a shareholder agreement.

In that case, this Business.com guide 5 Steps to Remove a Shareholder can help answer your question. If there is no shareholders' agreement in place, you should reach out to a legal expert to understand your options. Without a legal reason to remove your bother, you'll have to negotiate with him to give up his 50% of shares. At the very least, a legal expert can help you negotiate a fair trade for both sides. The guide outlines additional precautions to take when removing a shareholder.

3

I don't think you can simply remove him, if you both earn equal shares then you both have equal rights meaning you cannot override him. Is this all drawn up officially, if so then there really is no way to remove someone, if its not, then its less complex from a professional point of view but then you have the moral problems. I would suggest you sit down and go through any issues you have because this is going to be the best way to move forward and you may feel he wants to get out of the business anyway, often people feel differently to what we initially expect.

If you have both decided that your brother wants out and its been drawn up professionally and you both have shares, consult your accountant or an accountant and ask how this can be done, they will advise what work is involved and any cost.

3

Being in business with family is always challenging but can be done if the expectations & boundaries are set right at the beginning. In your case, it sounds like your brother is taking advantage of the situation. You can offer to buy his 50% stake but that will depend on the price he is willing to accept. Also, talk to your lawyer to review any agreements you have in place and any legislation you can use to change the situation.

Finally, any business situation like this can be very stressful, so I understand it's going to be a difficult time for you. Try to take an objective view of things and keep the emotional element at bay. I have been in a similar situation with a difficult business partner and it took me 2 years to resolve it. I did not get exactly what I wanted but I cut my losses, got out & went on to build on other successful ventures.

3

I'd suggest reframing the problem. What if you, instead of asking "can I get rid of him" you ask yourself "how can I inspire, influence him to want to sell his shares?"

How do you do that, you might ask?

Not through aggression or passive aggressiveness or manipulation (not that you would do any of those things). You engage him as a human being to learn what his objectives in the company are, why is he not participating in the growth of the company and what he would instead rather be doing and what's preventing him from doing it?

At that point, if you've talked to him as a human being, in a civil, respectful, inquisitive (not accusatory) tone and manner, you will learn a lot (which is gold) and can effectively, creatively, collaboratively problem solve, help him get his needs met and yours too. Healthy research and negotiation.

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