Hamilton-based Maxime Rouast was ordered to pay an extra $44,700 on his purchase of minority shareholder Christophe Maunier’s forty per cent stake in their company: New Zealand Guidance Plus Ltd. As director, Mr Rouast failed to comply with Companies Act rules to pay a fair price.
Strict rules in the Companies Act require any purchase of shares by a director to be at ‘fair value’ when buying out fellow shareholders.
The two set up business in 2016, providing services to Francophones looking to invest in New Zealand. They first met at school, sharing a common interest in computers. Mr Maunier is based in New Caledonia.
The High Court was told their business relationship broke down progressively through 2021. Mr Maunier said health issues were affecting his ability to work. Mr Rouast doubted this.
After several Skype discussions, it was agreed Mr Rouast would buy out his associate’s minority interest in New Zealand Guidance. This led to a dispute over their company’s value.
Mr Maunier told the High Court he was presented with a ‘take it or leave it’ price. Mr Rouast indicated he would extract funds from the company as payment of management fees, leaving their company a worthless shell, if Mr Maunier did not accept the offered price.
Mr Maunier signed.
He later sued, claiming the purchase price was too low.
There is no need to prove commercial pressure forced a sale at undervalue, Justice O’Gorman ruled. The Companies Act simply requires a director pay ‘fair value.’
NZ Guidance was described as a small company, dependent on skills of its management, operating in a niche market.
Justice O’Gorman valued the company at $128,000 on a ‘notional liquidation’ basis.
Its major assets in 2021 were money in the bank and a website. Mr Maunier was entitled to forty per cent of this value: $51,200.
Justice O’Gorman ordered Mr Rouast pay an additional $44,700 on top of the price previously paid.
In 2021, Mr Rouast paid $20,000. This payment was based, in part, on what Justice O’Gorman ruled was an incorrect calculation of shareholder current accounts.
Payment of a salary to Mr Rouast’s spouse was written back as drawings by Mr Rouast. The court was told this salary was calculated to split Mr Rouast’s taxable income between the two. There was no evidence of work done by his spouse to justify the salary supposedly paid.
Increasing this assessment of Mr Rouast’s drawings from the company as at 2021 meant not all of the 2021 payment of $20,000 could be considered payment for the shares purchased.
Maunier v. Rouast – High Court (15.08.24)
24.197