Fawlty towers hotel group Essay Example | Topics and Well Written Essays - 2000 words

Fawlty towers hotel group - Essay Example If all the three other than basil are on one side then it will be the majority. If Basil gets support of any on of the remaining three, then these two can be termed as majority according to the shares they hold. Element 1: Now let us discuss about the possibilities of the transactions Basil want to do. He was holding 40% of the share in the company and wishes to retain as much capital as possible from it with out disturbing its financial structure and security. This implies that he was not willing to retain his investment from the cash reserves of the company or by disposing the assets held by the company. Moreover he needs another person to support his decision of selling his shares. As his wife Sybil is holding 20% shares and was in support of his decision he gets majority of 60% share holding for the proposed disinvestment. Now the question lies in the manner the deal to be followed. There is no obstacle for the disinvestment of 15% of the shares as his wife is willing to buy them by paying half of the amount from her own savings and other by taking loan from the company or from the bank. Here also the practicality and legality lies between these two persons only. The company is a privat e owned firm, the buying of shares in that company involves the inquiry of encumbrances by the buyer. As the buyer is a partner of the company she must be aware of the financial status of the company. Despite being like that, still if there is a need to advice on that we have to consider, then it is the financial status of the company. It was mentioned that Sybil was planning to take loan from the company or from bank on the company guarantee. This proves that the company is having strong fundamentals, which involve sufficient cash reserves along with fixed and current assets dominating short term and long term liabilities. So the hurdles regarding financial matters were cleared. Sybil can acquire 15% of the shares from Basil with one half by her own savings and the other half by a loan from the company or from the Bank. The decision needs approval of share holders holding at least 51% of the company's shares. As both Basil and Sybil are together holding 60% of the shares it can be approved with no objections. (If objections are there from the other two partners, they cannot be considered as these two constitute the majority of the share holdings). Element 2: This element seems to face some obstacles in completing. Rose Mary wants to buy further 5% of the shares from Basil on a condition that in two years the company should buy all of her shares, which may amount to 25% of the total shares. This needs the approval of all the share holders of the company or a majority of them. Here again, Basil and Rosemary constitute majority share holding to take a decision. But Basil is keen on not disturbing the financial structure of the company. Within two years if the company is not having enough cash reserves ( as Rose Mary wants) to buy the Rose Mary's share, which constitutes 25% of the total value of the company (the holding of her if she buys further 5% from Basil's shares), the financial structure of the company will be disturbed and that was against the wish of Basil in case of his disinvestment. This may not be possible because after distributing the profits to the partners there may not be enough cash to buy the 25% of the