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  1. #1

    Default Company share apartments: Any known cases of directors selling shareholder's shares?

    I own an apartment in a company share building - technically, I own shares in the company and have a licence to occupy. All shareholders are aware that the directors may sell an owner's shares if they fall into arrears on the levy or infringe company rules. Does anyone know of any cases where this has actually happened?

    Note: I raised this question in the property investment sub-forum a week ago, and though it was viewed (456 times - thanks guys), there were no replies. I'm thinking the 'Finance, legal and tax' sub-forum might be more appropriate. Or perhaps there are no replies because no one knows of it happening? I would really appreciate some perspectives on this - thank you in advance.
    Last edited by 3dimensions; 26-03-2012 at 08:28 AM.

  2. #2
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

    Default

    I'm sure it has happened. It's a bit of a niche area though...very few company share buildings around...so not something I can answer off the top of my head. If I were to look into it, I'd want to know what the beef actually is?

  3. #3

    Default Specifics

    Quote Originally Posted by Ivan McIntosh View Post
    I'm sure it has happened. It's a bit of a niche area though...very few company share buildings around...so not something I can answer off the top of my head. If I were to look into it, I'd want to know what the beef actually is?
    Thank you for the response. The Occupation Licence states that "shareholders will not sublet or part with possession or occupation of the apartment...". The only persons permitted to "occupy" are those named on the Occupation Licence (i.e. the shareholder) or their "direct family" which is defined as "parents or children of the shareholder". Beef #1 is that the definition of direct family is very narrow (for instance, does not permit siblings of the shareholder) and in the 21st century, this definition is possibly discriminatory as what constitutes "family" is generally defined much more inclusively and may include non-blood significant others. Beef #2 is that if you were to "lend" your apartment to someone not narrowly defined as family (and as shareholder, were not there yourself, but had not moved out as such, your things were still there) you would be deemed to have parted with possession, with the threat of having the Board of Directors move to sell your shares, i.e. throw you out. This threat makes it difficult for shareholders to offer and reciprocate hospitality to responsible friends whom they trust. Beef #3 is that reminders about this particular rule don't create a good atmosphere, and moreover, it is rumoured that an action to sell a shareholder's shares would be unlikely, or not succeed if attempted. Hence, the question about has it ever happened. Hope this clarifies.

  4. #4
    Join Date
    Nov 2011
    Posts
    445

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    me too. I'm also not too familiar with this area.

    What sort of issues are your anticipating may happen?

  5. #5
    Join Date
    Jan 2006
    Location
    Wellington
    Posts
    561

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    Those are just the rules that your companyshare is operating to. I am a director of a company share that lets shareholders rent out the units that the share holders have a license to occupy. So within the constitution I would think that you could get the rules changed.
    Am not sure about the shareholder arrears situation and selling down the shares. I suppose that if it is not specifically precluded in law or the constitution that the directors could do it.
    Doug

  6. #6
    Join Date
    Dec 2010
    Location
    Cambridge, NZ
    Posts
    1,375

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    It is likely that a court would rule forfeiture, in the circumstances of letting associated guests use the apartment, was too harsh a penalty. That is my first impression however, and not a legal opinion.

    I can well imagine the rigid application of the rules would cause some ill-feeling. As [email protected] says, you could look to gather support for a change in the rules to allow extended family or known short term guests to occupy.

    If I get some spare time I might have a look into the area.

  7. #7

    Default

    COMPANY SHARE FORFEITURE
    Thank you to all respondents for their replies. In summary - shareholders could address the company rules to clarify or extend the definition of occupation in a more flexible manner. Given an oft-repeated mantra "Everyone who has bought into the building, signed up to those Rules, and there is therefore no question of even asking for their review", there may not be much traction there... So that's why I am interested in whether the question of occupation has been tested in court. If there is no case law to support a very strict interpretation, then "threats" that shares may be sold, are empty threats. If you do have a minute, Ivan, it would be great. Thank you in advance.


 

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