Business partner not paying dividends

[JohnR786]

Hi, am looking for some advice, I am a share holder in a business with 45% shares, my business partner/director holds the other 55%.

my business partner isn't paying dividends to me despite the company making large amounts of profit each month and plenty of money sitting in the business bank account, for the past few years he as been telling me he will pay, than covid hit and he said he cant pay during covid even though the company was still operating and making the same amount of profit. couple of months back he said he needs the money for his other business and when it come back he will pay me. now he is ignoring my emails.

I work in the business full time and look after all of the operations. what can I do?

Thank you

 

[Financial-Modeller]

Is the business paying dividends to the other shareholder?

 

[JohnR786]

Is the business paying dividends to the other shareholder?

thank you for your message, no the other share holder isn't taking dividends, as he is the owner of the company and he isn't taking dividends for him self or paying me. He is just keep all of the money saved in the bank. he has many other business's which keeps him financially happy. so he doesn't take money out from this company.

thank you

 

[The Resolver]

he said he needs the money for his other business

Can you clarify. Do you mean that he is diverting monies to/paying expenses of, his other business? To do that without dividends/salary means he owes those monies back to your company.
Is he, however, awarding himself a large salary despite you being the one who does all the work?
Even if the monies result from him awarding himself an excessive salary , you may have cause to claim in court unfair prejudice of your minority interest and/or breach by him of his statutory duties as director to act responsibly and treat shareholders fairly.

It does not make sense for him to continue to ignore your concerns and he ought to , with the right approach, begin to resolve issues with you . He needs to understand that one option you have after all thsi time is to retire as employee. This would mean you could work elsewhere and collect 45% of any dividends eventually agreed.

I should of course ask whether you have a Shareholders Agreement?

 

[JohnR786]

Can you clarify. Do you mean that he is diverting monies to/paying expenses of, his other business? To do that without dividends/salary means he owes those monies back to your company.
Is he, however, awarding himself a large salary despite you being the one who does all the work?
Even if the monies result from him awarding himself an excessive salary , you may have cause to claim in court unfair prejudice of your minority interest and/or breach by him of his statutory duties as director to act responsibly and treat shareholders fairly.

It does not make sense for him to continue to ignore your concerns and he ought to , with the right approach, begin to resolve issues with you . He needs to understand that one option you have after all thsi time is to retire as employee. This would mean you could work elsewhere and collect 45% of any dividends eventually agreed.

I should of course ask whether you have a Shareholders Agreement?

Thank you for your message
He is diverting money to open or support his other business's , the money does come back about a year later in the to business account, this has happened about 4 times in the past 5 years.

He is not rewarding or paying him self a salary from our company. The company basically sells goods, than pays all expense, bills and taxes, the profit left over just sits in the bank.

yes we do have a shareholders agreement which states that I must work in the business full time.
It doesn't say how often the dividends will be payed out in the agreement.

Thank You

 

[Deleted member 335660]

Thank you for your message
He is diverting money to open or support his other business's , the money does come back about a year later in the to business account, this has happened about 4 times in the past 5 years.

He is not rewarding or paying him self a salary from our company. The company basically sells goods, than pays all expense, bills and taxes, the profit left over just sits in the bank.

yes we do have a shareholders agreement which states that I must work in the business full time.
It doesn't say how often the dividends will be payed out in the agreement.

Thank You

Does the shareholders agreement state the voting needs for key decisions. I thought the default was 75% so this might help.

 

[Deleted member 335660]

Just a thought, but as he isn’t ignoring your wishes you could just go off sick for a while. You would still be in full employment but this might send an appropriate message.

 

[Mark T Jones]

As is always the case in these situations, the best starting point is a grown-up face to face conversation where you discuss the situation and openly express your own expectations.

You are presenting this very much as a master / servant relationship - if you can't be proper business partners, you might want to consider whether it is the right overall situation for you.

The shareholder agreement mentioned may well hold some answers, at the moment we have no detail to know.

There are options open to you, which might include walking away.

 

[UKSBD]

Are you a director too or just a share holder?

Are you being paid the market rate for the work you do?

 

[Paul Norman]

As is always the case in these situations, the best starting point is a grown-up face to face conversation where you discuss the situation and openly express your own expectations.

You are presenting this very much as a master / servant relationship - if you can't be proper business partners, you might want to consider whether it is the right overall situation for you.

The shareholder agreement mentioned may well hold some answers, at the moment we have no detail to know.

There are options open to you, which might include walking away.

This. Exactly this.

A face to face meeting to talk through the detailed issues and agree a way forward.

If that is not possible, then lawyers are going to be needed. And large bags of money.

 

[DontAsk]

thank you for your message, no the other share holder isn't taking dividends, as he is the owner of the company and he isn't taking dividends for him self or paying me.

So there is no unequal treatment.

Has the company actually declared a dividend?

Do you have the same class of shares as the director?

He is just keep all of the money saved in the bank. he has many other business's which keeps him financially happy. so he doesn't take money out from this company.

That's different to what you said to start with, i.e.:

he said he needs the money for his other business and when it come back he will pay me

Its one or the other! Is he taking money out to fund other companies?

He may be entitled to do that. Does this company owe him money through the directors loan account?

 

[Financial-Modeller]

Did the majority shareholder actually tell you that he intended that the company would pay dividends unconditionally @JohnR786 ?

It seems that there is no wrondoing, just a gap between your expectation that retained earnings would be distributed dividends, and his expectation that retained earnings would be used temporarily in his other ventures.

 

[The Resolver]

Does the shareholders agreement state the voting needs for key decisions. I thought the default was 75% so this might help.

Subject to the Shareholders Agreement listing other subject matters for Resolutions. the 75% requirement is for Special Resolutions which include reducing capital, changing the Articles of Association, going into vountary liquidation or changing the name and buying shares in itself.

If you send me ([email protected]) the Shareholders Agreement and book yourself into a free call as below I will be able to begin to advise on strategy.

 

[Ian J]

Shareholders Agreement liusts other su bject matters of Resolutions. the 75% re

And again in English

 

[nelioneil]

I'm sure someone can step in, but I beleive one of the statutory duties of the director is to promote the success of a company. This is laid down in law (CA 2006). You could have a case if there is evidence to prove he is diverting resources away from the company, which it sounds like he is if monies are going towards his other businesses.

 

[WaveJumper]

As already mentioned above a proper sit down face to face meeting is called for and thrash out your concerns, before looking to take what I am sure will become more costly action

 

[Chris Ashdown]

Is he paying interest at the going rate to the company for the loans to the other company. its not his money it belongs to the company there is a big difference, If northing else these payments need to be shown in the monthly accounts
Are you a signature on the bank account and access to all transactions of the company

 

[The Resolver]

You said that the Shareholder Agreement requires you to work for the company. Does it state, as is usualwhen employment is required to be maintained, that you have to offer up your shares to the other Shareholder on you ceasing to work for the company ?