Shareholder Rights?

[anthony15]

Hi all,

I have been trawling the web for some information on shareholder rights including visiting a good website of the same name. I own 50% shares in a small Ltd Co. My business colleague owns the other 50% but is also a director. The company was formed in November of 2006 & is doing extremely well for a first year company. I used to be a director at the start but was forced to resign because I do not have a great credit reference, so I resigned in the interests of the company as we were finding it difficult to obtain bank accounts & credit accounts.

I took on the role of general manager of the company with a basic salary of £500 per month as did he take the same salary, we both missed payments because of hard times but make them up when money is available. We had a great business relationship until recently. 3 months ago we moved to a bigger office & things were fine for a while but my colleague kept treating me as the underdog, taking credit for my achievements & generally treating me like an ordinary employee (despite me not having a job description etc).

I asked to be re-instated as a director now the company has credit reference of its own, My colleague refused to re-instate my directorship, saying that if I put in £30,000 into the company I can be a director. I refused as he has a loan account of somewehere between £20,000 & £25,000. This obviously will be paid back assuming the company continues to be succesfull. We fell out over how much he has put in, he claims it is £34,000 (which I know is wrong). He is trying to claim for debts he built up as a sole trader from before we worked together, I know this is illegal but am not sure what to do about it.

I have not put any financial backing into the company, but have put a lot of hard work & time in, frequently working 70+ hours a week. I set up the office from scratch & the computer systems (he knows nothing of running an office). I brought on more customers & set us up with a factoring service to fund it all. He now refuses to allow me my equal rights, will not allow me to be a director or co-signature on the bank account.

I got so upset by all of this I walked out of the office on the 5th Feb & have not been back since. I have spoken on the phone but to no avail. I have demanded my back wages which amount to £1250 as I am now also unemployed, well presumably anyway. I feel very betrayed & upset. What are my rights in this situation? If he continues to be wrongful in his actions toward me can I remove his directorship? He is the only director at the moment & the accountant is the company secretary. please somebody help as I do not have the money to seek a solicitors advice & he knows this.

Thank-you in advance for any help you can give.

[DuaneJackson]

As you're 50/50, it's a deadlock. Only option I can see if to negotiate with each other or walk away. I've been there before.

Never, ever gonna go 50/50 again!

[anthony15]

As you're 50/50, it's a deadlock. Only option I can see if to negotiate with each other or walk away. I've been there before.

Never, ever gonna go 50/50 again!

Not what I wanted to hear of course! However I have to say I expected it. I don't think I will be able to negotiate as he is not a "reasonable man" although I will try. I obviously do not want to throw the business away, I fully belive this business could go a long long way if treated properly. I know I could demand my equal share of the dividends but who is to stop him swallowing them all up in a massive salary claim?

If I cannot sort this out but do not want him to walk away with all the profits, is there anything I can do? I am not a vindictive person, but this has essentially rubbed out all my hard work overnight. It will take me a long time to recover from this, if I can recover at all. Things are not good financially as it is on a persoanl level, I think he knows this which makes him worse than I first feared.

It is such a crying shame that greed dictates these kind of actions. In the first year of trading we turned over £80,000 & in the first quater of this year we turned over half of that already!

EDIT, additional info:

BTW I still have keys to the property, do I have any rights to enter the building. I don't want to remove property just to access the business & it's resources. Also on the subject of the money owed to me, I have on my driveway a company vehicle which I obviously have to return but have stated I will hold it as colateral until the debt is paid or if needs be seek an order through the court to sell it & reclaim my money, there isnt anything illegal about this is there?

[DuaneJackson]

You could just sit on your shares I guess. It'll leave him in a less than ideal position. But seeign as he doesn't know how much is loaned to the company then I suspect he doesn't have decent records which could imply he's not bothered about playing by the rules.

So I wouldn't be surprised if he started a new LTD company and transferred the business to that.

Can you not start again on your own?

[anthony15]

I could just restart on my own, but the feeling that all this has been handed to him on a plate makes me feel sick. I just feel like being pig awkward at the moment. I hope this feeling passes but I feel that if I cant benefit from it why should he? Sorry if this sounds a bit bitter, it's just how I am feeling at the moment.

[DuaneJackson]

Trust me, I know exactly how you feel.

I eventually got over it, moved on and haven't looked back since. He;ll get whats coming. Leave him to it (but do wait and see of you get better advice when some of the pros are around tomorrow!)

[An Oasis]

Buddy you walked out, it is only in your own mind that you do not want to be there... You can walk back in anytime you want.

The key question is how difficult do you want to make this for your partner? I suspect that your are a genuinely nice person and things have come to a crossroads???

Take it from personal experience I created a number of companies and then walked because I used to be soft!!! What happened after I walked they folded - the lesson is whilst it causes you pain at the time you are doing great things. Get the company back or insist on a payoff, don't be a martyr.

[anthony15]

Thanks An Oasis,

I have been thinking on the situation since. Given what has passed I do not wish to carry on working with somebody as greedy & nasty as my colleague turned out to be. What I would be happy with out of this mess is the company vehicle which I have on the driveway. There are 9x payments of roughly £560 a month left to pay. I am owed £1250 in back money. I am thinking of trying to get a deal wherby we forget the money I am owed & I will give over my shares in order to keep the vehicle at no extra cost to me. I would of course expect the title to be transferred to me, only thing is I am not really sure how to go about it.

[anthony15]

UPDATE:

As an update to this post I have today recieved the money I was owed in back wages! I am therefore returning the vehicle to the company that I was holding as colateral. I have made some headway on looking into my rights as a shareholder, apparently as a 50% shareholder I can call a general meeting & demand that certain records be kept & that I have access to these records. I can also apparently ask for an audit of the company to be done, this may be very useful in the light that I do not believe in the amounts the director is claiming against his loan to the company.

[yorkshirejames]

A very similar question was answered in The Sunday Times yesterday, page 14 of the Business section. This concerned a 40% silent partner.

[i.m.]

We have just acted for somebody in a very similar position. There are a number of things you can do although it is true that as 50:50 it is more difficult. But ultimately you can seek to wind up the company if you can say that you had a legitimate management interest or things like that. Get in touch if you want and we can give you a steer.

Cheers

BR

[anthony15]

We have just acted for somebody in a very similar position. There are a number of things you can do although it is true that as 50:50 it is more difficult. But ultimately you can seek to wind up the company if you can say that you had a legitimate management interest or things like that. Get in touch if you want and we can give you a steer.

Cheers

BR

Thank-you I will PM you.

[adam sidat]

if you check your rights under British Law at companies house / citizens advice bureau / google (shareholder rights) (dont mention your problems. just ask for facts) - i am sure you will find that even with only 10% shareholding you can convene extraordinary general meetings, ask - nay demand documents, audits etc and possibly demand inslalment of your own representative on the board (make sure accurate minutes are kept at these meetings)

[Kent Accountant]

if you check your rights under British Law at companies house / citizens advice bureau / google (shareholder rights) (dont mention your problems. just ask for facts) - i am sure you will find that even with only 10% shareholding you can convene extraordinary general meetings, ask - nay demand documents, audits etc and possibly demand inslalment of your own representative on the board (make sure accurate minutes are kept at these meetings)
How could someone with a 10% shareholding demand their own representative on the board?

[anthony15]

if you check your rights under British Law at companies house / citizens advice bureau / google (shareholder rights) (dont mention your problems. just ask for facts) - i am sure you will find that even with only 10% shareholding you can convene extraordinary general meetings, ask - nay demand documents, audits etc and possibly demand inslalment of your own representative on the board (make sure accurate minutes are kept at these meetings)

Thank-you, yes I have already taken steps on this measure. Having found out my rights & as a 50% shareholder I can & will demand all of these things except for possible a representative on the board as this company has only two shareholders. However I will demand constant access to the above mentioned records & indeed a full audit of the company. I am waiting for a reply from the company secretary as to a date for the meeting. Will keep you informed.

[anthony15]

Hi all,

Sorry it has taken me a long time to update this but time just seems to have disappeared! This matter is now resolved. With discussio betweenthe company secretary we came to the agreement that I would receive my back wages & then a lump sum of £6000 for loss of office. I took this offer & havent looked back since! I have used the money to build a small business of my own building custom made computers & repairing PC's in the local area. I want to thank everybody on this site for their kind help & advice. I hope I can still be of some use in helping other members on this site from time to time. Anyone want a new pc? :p

[Jenni@FarrantFrost]

Anthony
So glad to hear this has resolved satisfactorily for you, and best of luck in your new venture

Jenni :)