Am I being scammed

[smartone]

I have recently become involved with a business following an introduction from my son to the business owners. My son is already a non shareholding Director and I have put in some capital in exchange for my son and I to take an equity stake of 30%.

The money has been banked with a promise, by email, that the shareholding will be sorted out. My son has not been allowed access to the bank account for various reasons and I have forced the issue with the bank and we have been allowed access without the other Directors Knowledge.

The account has gone from 20k to zero with only about £6k being obviously related to the business. Various cash transactions have taken place £2k and £8k directly into the Directors brothers bank account. All the money the business has generated, in its first 2 weeks, has been taken out.

I have carried out further research on these two and it appears they start lots of business's and nearly all of them are dissolved before the first accounts are due!!

I have forced a meeting with them at their accountants office tomorrow and just wonder what I can do legally to get me out of this hole. I have lots of evidence to present but not sure how far I can go. I would like to take control of this business and run it properly.

The business is viable if operated correctly but I feel the Director is not meeting his responsibilities.

It is far more complicated than this brief message and I feel we have been taken in

 

[alfie]

Have you been to companies house and gotten hold of the shareholders listing? It costs £1 to do this.

Just to see who and what shareholdings they did when setting it up. Forewarned is forearmed.

 

[smartone]

Yes I have that information the main Director has 100% and my Son came on board as a Director only.

I am more interested about what I can do from this point forward bearing in mind company law.

 

[smartone]

The shareholding was to be sorted as soon as the business was up and running which was two weeks ago now.

 

[The Resolver]

It might be worth searching CH against the other companies to see if you can identify other investors who may have lost out like yourself. Its not a crime to fail in business but it is a crime to a take in investment with the intention of using that money for your own purposes and not those of the business. If the evidence shows a series of similar investments followed by withdrawal of funds and closure then you may have sufficient evidence of a course of conduct to take to the police.

That doesn't help you in the short term. A more positive approach at this stage is to disabuse the others of the notion that you are ignorant of company/contract law. But first you need to be holding a share certificate for the 30%. I would not raise your concerns of where the money has gone at this stage. You are not yet shareholders just people who have given monies under a contract to issue you with the shares. If you make your complaint heard you will discourage them from issuing you with the shares. Once you have that then you must exercise your rights to call a meeting and table direct questions of the directors. Although no doubt they may have good reason to have withdrawn the funds (eg it may be by way of repayment of a directors loan account eg for monies lent by them or dividends not drawn down etc) you may find evidence of breaches by the directors of their statutory duties and that they then become personally liable to reimburse the company.

But use the meeting to obtain evidence by them in front of the accountants that they have agreed to issue the shares. Its too early to give them reasons to not want you as shareholders.

Call me if you want me to expand on my advice pre the meeting (07885 728801)

 

[smartone]

I really want to confront them but realise how vulnerable I am without the share certificates thanks for the reply. They have decided not to attend the meeting at the accountants tomorrow, which is no surprise but they have given us the opportunity to meet them the week after.

In light of your advise I will decline meeting them as I will not be able to "bite my tongue" but will push for the share certificates prior to any meeting.

 

[The Resolver]

I suggest you obtain a Stock Transfer form and complete it so it just needs a signature for when you next meet them. Have they given any reason to refuse?

You should also start to gather together the emails and other evidence that prove the reason why you gave them the monies ie in return for the shares.

But I wonder whether you have enough information to be clear on your objective? A big question to answer is whether the payment you made was the payment for the shares ie someone agreed to transfer some of his shares to you in return for the monies, or a loan to the company on the basis of which shares were issued to you.

Did you do any due diligence on the company? Its one thing to have an understanding of their trading and gross sales but the internal financial health of the company may be poor. Who does it owe monies to?

If your monies were a loan you may be better off calling in the loan. The alternative is to pursue the others personally for breach of contract.

My point is that before you start on any particular demands you need to understand your options and the pros and cons of each and then decide which objective to pursue.