Business Law
meeting to appoint two more directors to the board. This would have meant that Mr. Mitchell’s boycott could not have prevented a board meeting being held, so he could be removed as a director and as manager of the restaurant. The quorum for a shareholders’ meeting, however, was two members – and again Mr. Mitchell refused to attend.
The business, in the meantime, was suffering as Mr. Mitchell’s attention was naturally divided between his duties to the restaurant and this dispute. More than that, being unable to hold a board meeting meant that SFR could not deal with its various statutory duties (filing accounts and returns) or address a VAT problem that had arisen.
Subsequent Costs
Both Mr. Mitchell and Mr. Wyman brought litigation against the other – Mr. Mitchell claiming that SFR was being run in a way that was prejudicial to him as a minority shareholder, and Mr. Wyman asking the court to make an order for a shareholder meeting of SFR at which one shareholder could count as a quorum, so that he could appoint the new directors.
Of course, the time and money involved in making those applications were considerable. As they worked their way through the courts, the parties in fact agreed that Mr. Wyman would buy Mr. Mitchell’s stake in SFR to end the dispute. After some discussion as to the exact valuation (Mr. Mitchell arguing that he should be bought out on the basis of the pre-dispute value of SFR, Mr. Wyman asking for the lower post-dispute value), that was the conclusion of the matter.
Clearly-defined Roles
The SFR case underlines the importance of agreeing in advance and in detail what role each partner should play in a venture.
Although it was always agreed that Mr.
Mitchell should run the restaurant, that skeleton was never adequately fleshed out and, in particular, it was never made clear whether Mr. Wyman’s position on the board of directors was meant to give him a real voice in the board- level management of the company.
By the same token, Mr. Wyman’s position as the majority shareholder was not given the level of protection that one would expect to see. It is very unusual, for example, for a shareholder with two thirds of the voting shares in a company to have to go to court to appoint a new director – or for a minority shareholder in effect to hold a veto over any board matter.
Much of what was discussed by the parties at the time is now the subject of debate and litigation, so the exact reasoning is not clear. It is safe, however, to say that plenty of people
34 entrepreneurcountry
Did The Rolling Stones’ Bill Wyman understand the business of joint venture?
would have been happy to act as the “silent partner” that Mr. Mitchell was expecting – and plenty of restaurateurs would have been happy to work more closely with Mr. Wyman. Whether these parties would have worked together on the deal if they had seen each other’s cards from the outset is not clear – but both parties would have saved themselves considerable time and cost if they had found this out straight away.
Conclusion
The lesson of SFR can be applied across any aspect of business that involves working with a new person or company.
An entrepreneur should be careful to ensure that their expectations for a particular contract or role are communicated to their counterparty – because what your candidate thinks of as, for example, the role of the CFO may be substantially different to what you want them to do. The consequences of that misunderstanding, whilst not necessarily as dramatic as for SFR, may be damaging to the business.
By establishing and agreeing key matters such as the delineation of their responsibilities early on, partners in any venture can decide whether they are entering into the new venture with the right person, or whether it would be wiser for the parties to go their separate ways. As the SFR case demonstrates, this can save a significant amount of time, money and stress in the future, as it ensures that both partners are on the same page when embarking on their new business venture together.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60