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  1. Post
    #1

    How to sell business shares (at an early stage)

    Hi GPers,

    This might seem to be an odd ball of a query but would appreciate some feedback on this.

    I am currently invested in a food business that just started a month ago and realised that I'm really not suited for this industry or business in general as well as thinking of doing a long term OE. I believe that the business would do well as proven by my business partner (he did a similar business previously which was franchised out). I was thinking of selling my shares off to another investor however it is at such an early stage that there is obviously no solid figures to provide them with.

    I know that there is a lot of people out there that are looking in to investing in to a business however do not have the capital to do so. What I was thinking of doing is holding a draw where anyone can put in $10/$20 to enter until a target is reached and an official draw will be hosted (by a third party). The winner will win all the shares and cover for any legal fees required to transfer the shares over.

    I'm just wondering if there are any legal requirements around this or any other factors that need to be considered?

  2. Post
    #2
    Check the company constitution to make sure you even can sell them. Non-listed companies can make restrictions like that. They might want to keep the number of shareholders low to limit reporting requirements and such.

  3. Post
    #3
    What city / region?

  4. Post
    #4
    Sounds overly complicated, if its such a solid proposition you can probably look at peers in the industry and value plant/equipment you've already purchased (lets be honest here, someone will want something for their investment, and anything you've bought so far for the business that can be sold will be the basis for any real valuation) anything else is just wishful thinking.

  5. Post
    #5
    teelo7 wrote:
    Check the company constitution to make sure you even can sell them. Non-listed companies can make restrictions like that. They might want to keep the number of shareholders low to limit reporting requirements and such.
    Definitely. Currently there is no agreement which forbids me from selling my shares to whoever I want to.

    MadMat wrote:
    What city / region?
    Auckland

    Subway wrote:
    Sounds overly complicated, if its such a solid proposition you can probably look at peers in the industry and value plant/equipment you've already purchased (lets be honest here, someone will want something for their investment, and anything you've bought so far for the business that can be sold will be the basis for any real valuation) anything else is just wishful thinking.
    I hear ya. From what I am proposing, its basically a chance to acquire a certain amount of shares which is pretty much a quarter of the business. By going in to the draw (basically $10 or $20) you get an investment that's worth for example 50k. Its sorta like how that lady in the US wanted to sell her house by having everyone go in to a draw where the lucky winner will own the house for $25 dollars and I would like to do something similar.

    https://www.goodnewsnetwork.org/woma...iting-contest/

    "The “Write a Letter, Win a House” contest will be accepting up to 68,000 submissions. As a means of Wagner recouping the cost of her home, participants are asked to pay $25 for their application."

  6. Post
    #6
    You might want to check the gambling legislation before you do that o.O

  7. Post
    #7
    You'd almost certainly fall afoul of gambling legislation eh, I'd get legal advice

    https://www.dia.govt.nz/Services-Cas...g?OpenDocument

  8. Post
    #8
    Yeah was just scrolling through the Act, noticed its got a section against bookmakers. I was wondering why we didn't have any competition against TAB.

  9. Post
    #9
    How much did you invest into the company?

  10. Post
    #10
    Geeze -how about asking your business partner to buy your shares?

    They likely wouldn't want some random suddenly being involved with the business.

  11. Post
    #11
    Unless the company is sinking / a dud and he wants to quickly offload them and run to an inexperienced buyer?

  12. Post
    #12
    brand wrote:
    Geeze -how about asking your business partner to buy your shares?

    They likely wouldn't want some random suddenly being involved with the business.
    Especially some dude who bought a $10 ticket haha...cause theyre really gonna be invested / knowledgeable enough to contribute to the success of a business...

  13. Post
    #13
    KevinL wrote:
    You'd almost certainly fall afoul of gambling legislation eh, I'd get legal advice

    https://www.dia.govt.nz/Services-Cas...g?OpenDocument
    Yeah definitely will be seeking legal advice before anything.

    teelo7 wrote:
    Yeah was just scrolling through the Act, noticed its got a section against bookmakers. I was wondering why we didn't have any competition against TAB.
    Yep, hence this will need to be done by a third party so it will stay within legal bounds.

    Subway wrote:
    How much did you invest into the company?
    I can't tell but its close to the amount I mentioned.

    brand wrote:
    Geeze -how about asking your business partner to buy your shares?

    They likely wouldn't want some random suddenly being involved with the business.
    They would if they could and understandable that they won't want some random involved however when I asked them about it they said that I could sell it to whoever I wanted to.

    LiQuid.Ace wrote:
    Unless the company is sinking / a dud and he wants to quickly offload them and run to an inexperienced buyer?
    It just started so it can't really sink and its not a dud, there's a physical store as well.

    Equity wrote:
    Especially some dude who bought a $10 ticket haha...cause theyre really gonna be invested / knowledgeable enough to contribute to the success of a business...
    Haha yeah I get where you're coming from but I don't think there's a way that I can control this. It's like the example I gave above about that house, there's no guarantee the person taking over can actually maintain the house at all.

    I'm actually open to other suggestions, should I wait 6 months to a year so there are some solid figures and get an agent to handle it for me?

  14. Post
    #14
    I like how weird this is, and I kinda want to think about it and give you some advice. But overall I think it’s probably a terrible idea.

    Have you signed a shareholder’s agreement?

    You will almost certainly fall afoul of the Gambling Act.

    I think it gets even messier if you don’t have a ‘fair value’ of the shares determined. Which is usually near impossible with a start-up anyway. Like are you going to profit from this?

    Anyway, probably a dumb idea. Talk to the other shareholder(s), have them buy you out or co-ordinate a new buyer with them.

  15. Post
    #15
    The other thing is how do you justify the value of the shares? If its a brand new company, no track record, no growth history, no/limited sales, why would anyone buy the shares at whatever figure you're determining to recoup the 50k investment?

  16. Post
    #16
    Sounds like you'd be buying a ticket in a lottery you don't want to win.

  17. Post
    #17
    I remember proposing a similar idea to Sam Hunt years ago.

    I suggested instead of trying to sell a few hundred books of poetry for $20, he should number them 1 to 1000, have a draw and pay the lucky winner $5000.

    His artistic temperament got in the way of a good deal imo.