50/50 Ownership Broken Down

[fives4fun]

Hi,
Almost 2 years ago, i started a business with a friend of mine.
It was a 50/50 partnership, where he brought us our first 100-150 customers (from previous role) and i invested the money to get the business going (Director loan currently £50k +)
I also bought a property (through my other company) from which we can trade. There is no official lease between parties.

First year was great, however he did go "AWOL" on a number of occassions, mainly Mondays and Tuesdays after a boozy weekend.
Over the last six month, this has spiralled out of control, and now he only invests 8-10 hours of his time per week into the business. He also disappeared from the business for an entire week after a large party on a Saturday night.

We have spoke about this numerous times in the past and he always says he will do better, but this only lasts a matter of weeks until it all breaks down again.

I am at the stage where i no longer want to be in business with him. I'd far rather cut ties and start again, this time on my own.

How do i break away from him?

I have offered to buy him out - not interested.

Can i dissolve the company?

As the landlord, can i kick our company out?

Even though my Directors Loan is 6 times his figure, would all assets still be split 50/50?

A lot of quesrions, but thanks for your time reading.

 

[japancool]

Activating The Resolver signal. @The Resolver.

He should be able to help you.

As the landlord, can i kick our company out?

I would be wary of this though. It strikes me that this could be breaching your duty to act in the best interests of the company.

 

[Frank the Insurance guy]

As per the post above, this is one for our member @The Resolver - I'm sure he'll be along in a minute.

 

[fives4fun]

Activating The Resolver signal. @The Resolver.

He should be able to help you.



I would be wary of this though. It strikes me that this could be breaching your duty to act in the best interests of the company.

Thanks for you response and i get where your coming from ?

I'd argue that for the last 6 months he has broken numerous duties of a director, and the interests of the company are low on his priority list at the moment.

 

[Paul Kelly ICHYB]

@The Resolver is a good start, but what does your shareholder agreement say ab out issues like this?

 

[The Resolver]

YIu use the term 'Director' so I will assume you run the business through a limioted company rather than the 'Partnership' referred to in your original post. So, some initial questions:-

1. Did you enter into a Shareholders Agreement? Not to be confused with the Articles of Association but a private agreement you both signed

2. Does the company operate under the Model Articles or a bespoke set? You can find out by searching the name of the company on this link.

3. Does he receive a salary , however nominal?

4. Is the business website significant for the marketing and,if so, who is the Registrant (the company, you , the other person?)

5. Is the business name/logo significant for the marketing and ,if so, has a trademark been obtained and in whose name (company or either Director)?

6. If you left would clients naturally migrate to your new company withouit much effort/touting?

Some answers:-

If you are owed monies by the company then, assuming the company is solvent, this is paid off in full, as well as other creditors, before the balance is shared

As @japancool says, you must not take any action which is damaging to the company whilst a Director as such would amount to a breach of duty.

The landlord company could terminate the licence/lease (however determined) but you could be gifting a claim for breach of directors duty and then become personally liable to compensate the trading company for damage suffered (but only IF your co-shareholder decides to take it to court. in the name of the limited company).

As a 50% shareholder you cannot alone dissolve the company (which requires 75%) but the court can do so if it believes that there is a stalemate over steps to take to run the company and it would be 'just and equitable ' to do so. The court would have to be satisfied that the 'partnership' had broken down on a personal level AND the company is suffering as a result. The court could also order one of you to buy out the other at an independent valuation.

But court action would be a last resort given the costs and delay. You both suffer for so lomg as no agreement and you both gain by agreeing to pursue mediation.I mediate (for all shareholders) or negotiate (for less than all) in these internal company disputes You are welcome to book yourself in for a free call (so I can learn more detail) on this link.