Business partner doesn’t want to pay me out

Discussion in 'Legal' started by Ceodesigns, Aug 13, 2018.

  1. Ceodesigns

    Ceodesigns UKBF Newcomer Free Member

    3 0
    Hello,

    I’m in a tricky situation at the moment with my business partner since I am in the process to leave our limited company (e-commerce business)

    We are both shareholders and the directors of the company which means we share and own 50/50 of the company. We don’t have no shareholder agreement due to our previous history (he is my ex intimate partner).


    However after 2.5 years of designig the prints for our t-shirts, doing all the admin work, accounts, etc and developing new ideas he decided to treat me badly and verbal assaulted me as well as racial discriminated me several times.

    I cannot work in this bad and toxic work environment anymore! (This has been going on over 5 months now)

    I decided to resign soon as a company director and sell my shares to him once I get the company valued and we both agree to the buy out valuation.

    My questions are now
    1) what happens if he isn’t willing to buy me out?

    2) As I’m still a director and shareholder can I still receive my wages and don’t work for the company until he pays me out since I cannot be in the same office with him due to his harassment and bad behaviour?

    3) can I set up a company now (I won’t be a competitor since it has nothing to do with what we are selling now)

    Sorry, English isn’t my mother tongue :)
     
    Posted: Aug 13, 2018 By: Ceodesigns Member since: Jul 18, 2018
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    10,042 1,053
    1. You keep your shares.

    2. What is the company policy on paying staff who are not working?

    3. Yes.
     
    Posted: Aug 13, 2018 By: Mr D Member since: Feb 12, 2017
    #2
  3. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

    2,215 599
    As a shareholder, you will keep your shares until a sale is agreed.

    You have certain rights - dependent on the percentage shareholding - the key right is to be annoying and ask for information.

    If you aren't working there I'm sure your partner would be within their rights to terminate your employment. In any case, you would need to resign if you wanted to set up in competition as this would be a clear breach of your responsibilities.
     
    Posted: Aug 13, 2018 By: Mark T Jones Member since: Nov 4, 2015
    #3
  4. Supercoach

    Supercoach UKBF Regular Free Member

    273 52
    You have considerable employment rights even if you don't have a contract of employment and he can't just decide to terminate you for not working let alone threaten you or racially abuse you!

    The leverage you have to get him to buy your shares (which he doesn't have to do) is to use employment law to force him to the negotiating table.
    Contact a specialist employment lawyer on the forum for an initial discussion.
     
    Posted: Aug 13, 2018 By: Supercoach Member since: Feb 10, 2015
    #4
  5. Paul Norman

    Paul Norman UKBF Ace Free Member

    2,334 705
    As stated above, your only real option is to negotiate the sale of your shares. They may not be worth the amount you gave for them. Indeed, they may have only a notional value. In any case, the other shareholder is not obliged to buy them.

    The issue of the bad treatment is different, and covered by employment law. It is likely that you have some redress in that matter, but that will only benefit you if the company has funds with which to pay you. It is one for the HR specialists here.

    As a general piece of advice, which I repeat often, and is sadly too late for you, never, ever get into this position.

    A Shareholders agreement, and a contract of employment is very important. If the person is known to you, or a close friend, or a husband or wife, the it is about 4500 times more important. And it should spell out, in precise detail, what to do on the date you want to go separate ways.
     
    Posted: Aug 13, 2018 By: Paul Norman Member since: Apr 8, 2010
    #5
  6. The Resolver

    The Resolver UKBF Ace Full Member

    2,976 971
    Under employment law if you left you would seem to have a claim for constructive dismissal (you should ensure your notice makes clear its is his conduct that has forced you to leave) . You have 3 months to file at the Tribunal but must pursue mediation through ACAS beforehand.

    The employment claim will not impact on your shareholding. You have much a more powerful negotiation argument under company law. As 50% shareholder and one of only two directors you are in a very powerful position that, if you negotiate in the right way, will motivate him to want to offer you a deal. I strongly advise you not to resign as director at the stage as you then lose all your rights to access to the financial and trading information that you will need to properly be advised in share value and negotiate a sale of your shares and of course he will not be able to make any Board decisions without your agreement as director.

    At present he cannot pass any Resolution eg to declare dividends, approve accounts remove you as a director or appoint anyone else as a director. Moreover once you cease working as an employer (nothin to do with your role as a director which still continues until you resign as a director) he will soon realise that he loses out more by not offering you an acceptable deal to sell your shares since ,although he alone will work the business in future, 50% of the business he is building up is still owned by you. Any dividends he wants to issue ( to save tax) must be shared 50/50 with you. If he wants to sell the business he will have to persuade you to also agree to sell and you will receive half the net monies. Any advisor will tell him to reach an agreement with you rather than carry on building up a business of which you own half.

    If no agreement is reached you do have the potential to petition the court under the Insolvency Act to order a liquidation of the company, This is on the basis that the two owners can no longer work together and so the company will suffer. The company does not need to be insolvent.

    I negotiate these shareholder partings every day for clients . You are welcome to call me to discuss free of charge how i can create a negotiation strategy for you.
     
    Posted: Aug 15, 2018 By: The Resolver Member since: Mar 31, 2006
    #6