Advice Required Please :(

Discussion in 'Legal' started by Normal bloke, Nov 10, 2018.

  1. Normal bloke

    Normal bloke UKBF Newcomer Free Member

    4 0
    Good evening all, I’m hoping that someone can give advice on the following scenario.

    Two years ago I set up my own limited company, being the sole director and shareholder.

    Business was going ok but not fantastic, I initially approached a friend for investment in return for shares in order to push the business to the next level.

    We had many discussions and eventually we both came to the agreement that it wasn’t feasible and practical due to his other business interests.

    I was reasonably happy to carry on as before and build the business on my own.

    However a year later out of the blue my friend approached me and told me he felt that he could really drive the business on to another level and I should really have a think about the offer.

    After much deliberation I decided that the investment along with the contacts and promises were too much to turn down.

    We agreed on 50/50 split on everything based on 50/50 for any profit etc.

    I was happy with the deal based on I’d rather have 50% of a very large pie rather than 100% of a tiny tiny pie.

    Due to my past credit issues and the company applying for finance I had to resign as I director but kept my shares and my friend became sole director and a personal guarantor in order to obtain the finance/investment.

    The investment came in and Business picked up but no where as much as we had wished, I kept my side of the so called deal and pretty much run the company including making the repayments every month etc.

    The director initially put in 20k for deposits which he took straight back out upon a vat refund due to the purchases.

    He initially made a small payment for ppc, approximately £700 and that was it.

    Meanwhile I was making payments of 2.5k per month on our repayments, not one extra penny came from the director and to add none of the so called plans for the business came to light, new website, marketing etc etc.

    The business was and is still growing slowly off its own steam, I pretty much do everything including day to day running etc including the long 18-20 hour days to make sure the bills are paid.

    The director has now totally out of the blue decided that he wants out, he wants to sell the investment and get out of the business, by him doing this would leave me with absolutely nothing, everything that I have done for the last two years would be down the drain and even worse still the business is just starting to turn the corner and actually make some profit.

    I have tried to talk to him in a sensible manner but he’s adamant that he no longer wants to be a guarantor for the purchases or have any involvement at all.

    I’m extremely disappointed in myself in believing everything that he told me and now by all accounts may end up with absolutely nothing even though I’ve pretty much built the main business by myself.

    Sorry for the long post but I’m wondering if as a 50/50 shareholder can I stop him from pretty much closing the company just because he wants to or is there absolutely nothing that I can do about it all. :(

    Advice appreciated thank you
     
    Posted: Nov 10, 2018 By: Normal bloke Member since: Nov 10, 2018
    #1
  2. Newchodge

    Newchodge UKBF Big Shot Free Member

    11,305 2,895
    In the first place he needs to know that if he is a personal guarantor on anything that guarantee sticks to his name whatever happens to the business.
     
    Posted: Nov 10, 2018 By: Newchodge Member since: Nov 8, 2012
    #2
  3. Normal bloke

    Normal bloke UKBF Newcomer Free Member

    4 0
    Yes he knows this, he wants to sell the assets and will be happy to make up any shortfall from the sale to pay the finance off which would remove him from being a guarantor.

    If he sells the assets the business will close!
    It doesn’t mean much to him but means everything to me :(

    Apart from the PG he has contributed very little to the business
     
    Posted: Nov 10, 2018 By: Normal bloke Member since: Nov 10, 2018
    #3
  4. The Resolver

    The Resolver UKBF Big Shot Full Member

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    I assume he is a director. _Whilst-he could effect a sale of the assets, If it is the Case that the company is not insolvent and such a sale prevents the company from trading then he needs to be informed that he Can be held personally liable for the damage Caused to the company as a result .This should be the starting point of a discussion to reach an agreement over his exit that does not damage the company. Enabling the company to continue its growth will benefit him better than his present plan.
     
    Posted: Nov 11, 2018 By: The Resolver Member since: Mar 31, 2006
    #4
  5. The Resolver

    The Resolver UKBF Big Shot Full Member

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    To clarify the liability would be for breach of his duties as a director under as 172 and 174 of the Companies Act 2006 which require him to act in a way that best helps the company to be successful (selling its assets does not) and to act in the way a reasonably competent director would act.
     
    Posted: Nov 11, 2018 By: The Resolver Member since: Mar 31, 2006
    #5
  6. Normal bloke

    Normal bloke UKBF Newcomer Free Member

    4 0

    Yes he’s the sole director but 50/50 shareholder.
    He has various other business directorships and according to him is not getting a quick enough return to warrant being a guarantor with the company so would rather bail out than do what was initially agreed.

    It sounds like he can pretty much do what he likes with the business and ultimately the main loser will be myself.

    He can afford to sell the assets at a loss and make up the shortfall to pay off the finance, but by doing this will surely finish the business.

    This can’t be right surely??
     
    Posted: Nov 11, 2018 By: Normal bloke Member since: Nov 10, 2018
    #6
  7. The Resolver

    The Resolver UKBF Big Shot Full Member

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    As I said he cannot “ do as he likes”. As I explained he will have to pay for the losses the company suffers and so would be foolish to sell off as he may threaten to do. The only way he can pursue his plan to run the business himself is by buying your shares.
     
    Posted: Nov 11, 2018 By: The Resolver Member since: Mar 31, 2006
    #7
  8. Normal bloke

    Normal bloke UKBF Newcomer Free Member

    4 0

    Thank you.

    What action as a 50/50 shareholder can I take to stop this madness.

    The business if run the correct way and with the correct input has the potential to become very successful.

    I’ve worked so hard and still do on a daily basis even with all this uncertainty.

    I’m not sure what steps to take, he has decent personal wealth while I’m just a hard working guy with very little. :(

    Thanks very much for your input so far.

    Kind regards
     
    Posted: Nov 11, 2018 By: Normal bloke Member since: Nov 10, 2018
    #8
  9. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    2,765 328
    Was his investment classed as share purchase or a loan?
     
    Posted: Nov 12, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #9
  10. The Resolver

    The Resolver UKBF Big Shot Full Member

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    I think the first base is to make it clear to him that you are fully knowledgeable about his liability if he sells off the assets and thereby prevents the company from trading against your agreement and will take action if he does so causing him to compensate the company for its losses. You also need to show your knowledge of company law procedure by serving notice calling a meeting of shareholders to discuss this matter, He needs to know that you cannot be forced to sell your shares (subject to any Shareholders Agreement and my looking also at the Articles of Association) and therefore the wisest move for him is to persuade you to sell or to buy his shares .

    There is no magic formula to immediately resolve these matters . Bu one thing is clear you seem to think you are in a weak position whereas as 50% owner and him wanting to sell (no-one other than yourself will buy his shares) you are in a very strong position. You just have to negotiate in the right way.

    Email me at [email protected] is you would like me to give you a work and fee proposal for devising a clear negotiation strategy for you to follow and ,if you wish, representing you in those negotiations.
     
    Posted: Nov 18, 2018 By: The Resolver Member since: Mar 31, 2006
    #10
  11. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    9,972 2,024
    This link gives some idea of the powers shareholders have in a company by law
    https://uk.practicallaw.thomsonreut...tPage=true&comp=pluk&bhcp=1#co_anchor_a940809

    Also To place a company into liquidation there must be a properly convened shareholders' ("members'") meeting at which the members must pass a special resolution for liquidation; and a liquidator will be appointed. A 75% majority is required to pass the resolution. If the requisite majority votes in favour there is nothing the minority can do.
     
    Last edited: Nov 18, 2018
    Posted: Nov 18, 2018 By: Chris Ashdown Member since: Dec 7, 2003
    #11