Dissolving a Ltd company and starting again under the same name

[FlorenceSapphire]

Dear UKBF,

I would like to close my Ltd company and start a new one, trading under the same name. This is a branded product based business manufactured outside the UK. I am a company director with 80% shares and there is another director with 20%. The other shareholder has breached our contract 3 times on the basis that they agreed to invest more money in to the business, matching my share of investment (80%/20%). I agreed to let them buy more shares, only their payment is still outstanding and they are full of excuses as to why they can not pay (only 58% has been paid of a very small amount). This leaves me to pay the suppliers on my own. In addition to this, their behaviour has and continues to tarnish the company through irresponsible actions putting my brand and name at risk. I know they will appose to the closing of the company, however because I am a 80% shareholder, surely I can override this on the grounds of their dishonest, unprofessional and unreliable behaviour?

The business has never traded or received any revenue. All funds have been spent on the product development and I have kept the business costs afloat on my own for more than 4 years. Can I legally just dissolve the company and start another company 'trading as' the same name? as significant money has been spent of the branded products. Or do I have to rebrand?

Do I have any obligations to the other shareholder and the money they invested previously? The company has no cash to cover all the costs need to run the business. I would be in a position to save funds if I started again with the same product in time.

 

[Scalloway]

Are you planning to sell the product this company has developed?

 

[FlorenceSapphire]

Are you planning to sell the product this company has developed?

Yes I am planning to sell the product. However, without the other shareholders agreed funds I can not pay the manufacturer the remaining amount owed to them. It would take me a while to personally save enough further funds to pay them.

 

[parkingandsecurity]

So you want to knock the manufacturer and pheonix to benefit for yourself?

 

[FlorenceSapphire]

Thank you for your response, however that hasn't answer my questions. I do not want to 'knock' the manufacturer. I would like to continue working with them. However, because the other shareholder isn't paying up, I am left to seriously consider the options. This is the third time this has happened in 5 years and the business relationship has completely broken down. I would not be in a position to cover all of the company costs on my own, and therefore am considering closing the company and starting again once I have saved sufficient funds.

 

[Scalloway]

o you want to knock the manufacturer and pheonix to benefit for yourself?

If you plan to use any of the Intellectual Property from the current company for you new venture your partner may feel the same.

 

[FlorenceSapphire]

That may well be true, however I am the 'producer' in the business. The other shareholder has put a fraction of cash in to the business, but I do the 'actual' work. The IP is worthless without me as we have never traded and it's my name. I want to proceed in an honest and legal way, however, he is not behaving professionally.

 

[Mr D]

So the company has a product and spent money on the brand. Intellectual property belongs to the company too?

So if you close the business what happens to its assets?

 

[Scalloway]

That may well be true, however I am the 'producer' in the business.

That may also be the case but if it was paid for by the company then it belongs to the company unless you have paperwork to prove otherwise. If the business is closed down the IP belongs to the Crown.

 

[FlorenceSapphire]

The product isn't finished. It's in a state of development. To finish the product we need to pay the manufacturer more money, which the other shareholder hasn't paid.

 

[Mr D]

The product isn't finished. It's in a state of development. To finish the product we need to pay the manufacturer more money, which the other shareholder hasn't paid.

So once the business is closed down you won't have any link to the product in any shape?

 

[FlorenceSapphire]

So where do I stand and what are my options? If the other shareholder still owes £20K and isn't going to pay, in addition to their dishonest and unprofessional abusive behaviour. I am once again left in a situation where I have debt and running costs which I have been paying alone for more than 4 years.

 

[FlorenceSapphire]

So once the business is closed down you won't have any link to the product in any shape?

Only once I have paid for the product in full to the manufacturer.

 

[Mr D]

So where do I stand and what are my options? If the other shareholder still owes £20K and isn't going to pay, in addition to their dishonest and unprofessional abusive behaviour. I am once again left in a situation where I have debt and running costs which I have been paying alone for more than 4 years.

No.

Separate you from the company.

You are a shareholder in a company.
The company has debt? The company has running costs?

The product if it has value is an asset belonging to the company.

 

[Mr D]

Only once I have paid for the product in full to the manufacturer.

If the business closes down however what link will you have to the product?

 

[FlorenceSapphire]

If I was to close the company down, but start again in a new name, once sufficient funds have been saved. This is possible I am assuming.

 

[FlorenceSapphire]

No.

Separate you from the company.

You are a shareholder in a company.
The company has debt? The company has running costs?

The product if it has value is an asset belonging to the company.

Yes it does. I have been paying for everything from my own personal bank account for 4.5 years. With nothing from the other shareholder, apart from the initial cash and little bit 5 months ago.

 

[Mr D]

Yes it does. I have been paying for everything from my own personal bank account for 4.5 years. With nothing from the other shareholder, apart from the initial cash and little bit 5 months ago.

They own 20% of the company. You building up a positive balance in director loan account presumably by putting money into the business.

 

[FlorenceSapphire]

They own 20% of the company. You building up a positive balance in director loan account presumably by putting money into the business.

The company is not in positive balance. It has a debt to the manufacturer and to me personally.

 

[FlorenceSapphire]

If the business closes down however what link will you have to the product?

None in this respect. I would start again with a different product but the same manufacturer.

 

[Mr D]

The company is not in positive balance. It has a debt to the manufacturer and to me personally.

Yes the company has debt to the manufacturer. So if shutting the company they would need to be informed.
The debt to you is a positive balance in directors loan account (DLA) unless you set up a loan specifically to the company at the time.
Positive balance in DLA just means you could have, in the future, taken that money out of the company tax free.

 

[FlorenceSapphire]

Yes the company has debt to the manufacturer. So if shutting the company they would need to be informed.
The debt to you is a positive balance in directors loan account (DLA) unless you set up a loan specifically to the company at the time.
Positive balance in DLA just means you could have, in the future, taken that money out of the company tax free.

Yes, completely. I would of course notify them. But wish to continue with them in the future with a different product. This current product isn't finished and can only be finished with more cash being injected. I have already paid more than my share. However, I want to continue and it seems so does the other shareholder. Only he doesn't want to put in any more money, yet reap all of the benefits from my hard work and my money. Can you advice what you believe is the legal thing to do. I can no longer work with the other shareholder as he is too dishonest and unreliable. I am the only one doing the work and paying for the costs. Surely this is not right.

 

[Mr D]

Well you could buy him out. Or he could buy you out.
That's the thing about shareholders, they don't have to do anything except own the shares. Lie back and get fat on their share of dividends / sale of business.

Presumably there is no shareholders agreement you drew up when you set out the business?

 

[FlorenceSapphire]

Well you could buy him out. Or he could buy you out.
That's the thing about shareholders, they don't have to do anything except own the shares. Lie back and get fat on their share of dividends / sale of business.

Presumably there is no shareholders agreement you drew up when you set out the business?

That would be an option, however I don’t have funds to buy him out, having already loaned the company an extortionate amount of money and I doubt he would agree to sell them anyway. We do not have a shareholders agreement. I founded the company and the articles of association are the ‘normal’ companies house articles.

 

[Mr D]

That would be an option, however I don’t have funds to buy him out, having already loaned the company an extortionate amount of money and I doubt he would agree to sell them anyway. We do not have a shareholders agreement. I founded the company and the articles of association are the ‘normal’ companies house articles.

A chunk of the problems we see on the forums pretty much daily are from not having an agreement in place for when things go wrong. Family members, husband & wife, best friends, simply two people with the same interest - all can have disagreements and arguments later on, up to and including costing them the business.

 

[FlorenceSapphire]

A chunk of the problems we see on the forums pretty much daily are from not having an agreement in place for when things go wrong. Family members, husband & wife, best friends, simply two people with the same interest - all can have disagreements and arguments later on, up to and including costing them the business.

Yes, I’m well aware of that now. Hindsight is a great teacher. With that being said, where do I stand having shared the above details? Based on the fact our relationship has broken down, the other party is a Director not delivering on our agreements (we do have financial agreements in place in writing of which he has breached all 3 of them by not paying), neither wants to sell their shares, I am 80% majority shareholder and ‘Producer’ of the product and all tangible work, I have all of the business relationships in place with manufacturers etc, his behaviour is toxic and not in the best interest of the company, and we are out of cash to continue, I have DLA’s with the business, we have debt to pay the manufacturer for the product. As noted previously, I could save more ’personal’ funds to start again in the future.

 

[parkingandsecurity]

So the company has a product and spent money on the brand. Intellectual property belongs to the company too?

So if you close the business what happens to its assets?

And you said your not fully paying for it. That means the IP might never transfer to you. Additionally if you want a clean start why keep the same name ?

 

[FlorenceSapphire]

And you said your not fully paying for it. That means the IP might never transfer to you. Additionally if you want a clean start why keep the same name ?

I would like to keep the same name as it is 'my name' and we have had significant press. I could start again under a different name, but where does that leave me with this current company? The grounds for closure and then starting again in the same business and manufacturer but under a different name? Would the other Director/Shareholder be in a position to sue me for phoenixing?

 

[Lisa Thomas]

How will the 'Newco' fund completion of the product?

 

[FlorenceSapphire]

How will the 'Newco' fund completion of the product?

Thank you for your response. This would happen through my own personal savings which I will have to allow significant time to save. Bearing in mind the current company has been operating off of my own personal 'director loans' for 5 years with no cash injection from the other Director.

 

[dotcomdude]

It sounds very much like you want to cut out your other shareholder and take advantage of the product development that has been completed within the original company - and you want to keep the same name so you can benefit from any press/contacts you have made.

If you proceed with this plan, I think your 20% shareholder will - and should - have a very good case against you and the new company - unless you purchase these assets in good faith from an official liquidator/administrator of the original company...

 

[FlorenceSapphire]

It sounds very much like you want to cut out your other shareholder and take advantage of the product development that has been completed within the original company - and you want to keep the same name so you can benefit from any press/contacts you have made.

If you proceed with this plan, I think your 20% shareholder will - and should - have a very good case against you and the new company - unless you purchase these assets in good faith from an official liquidator/administrator of the original company...[/QUOTE
As previously noted, the company has been running on my personal funds for 4.5 years which have now run out. The company has no cash, revenue or profit. I can not afford a professional liquidation. The only 'assets' are the prototypes which are not finished because we have run out of cash. I could purchase the prototypes from Oldco once I have saved enough money to do so. I have no option but to close the company as the other shareholder is not paying his agreed share, leaving me with debt once again. Yes, he may have a case against me, but this company has been running on my good faith and money for 4.5 years with nothing from him.

 

[FlorenceSapphire]

As previously noted, the company has been running on my personal funds for 4.5 years which have now run out. The company has no cash, revenue or profit. I can not afford a professional liquidation. The only 'assets' are the prototypes which are not finished because we have run out of cash. I could purchase the prototypes from Oldco once I have saved enough money to do so. I have no option but to close the company as the other shareholder is not paying his agreed share, leaving me with debt once again. Yes, he may have a case against me, but this company has been running on my good faith and money for 4.5 years with nothing from him.

 

[Mr D]

As previously noted, the company has been running on my personal funds for 4.5 years which have now run out. The company has no cash, revenue or profit. I can not afford a professional liquidation. The only 'assets' are the prototypes which are not finished because we have run out of cash. I could purchase the prototypes from Oldco once I have saved enough money to do so. I have no option but to close the company as the other shareholder is not paying his agreed share, leaving me with debt once again. Yes, he may have a case against me, but this company has been running on my good faith and money for 4.5 years with nothing from him.

The assets will remain with oldco until you purchase them / newco purchases them or you dissolve the company.


The fact you have been running it for 4.5 years with personal funds is basically irrelevant now. You lose your investment the moment the company is dissolved.

 

[Ian J]

we do have financial agreements in place in writing of which he has breached all 3 of them by not paying),

Is it possible to threaten to sue your partner for not fulfilling his obligations I wonder

 

[Mr D]

Is it possible to threaten to sue your partner for not fulfilling his obligations I wonder

Threatening being cheaper by far than actual civil action?

 

[FlorenceSapphire]

The assets will remain with oldco until you purchase them / newco purchases them or you dissolve the company.


The fact you have been running it for 4.5 years with personal funds is basically irrelevant now. You lose your investment the moment the company is dissolved.

Thank you for your reply. So am I within my rights to dissolve the company on the grounds that we have run out of cash? Register a Newco and purchase the assets at a later date? Or do I need to purchase the assets before dissolving the Oldco. I do not want to be in any unlawful situation, only I can not continue with the current setup. Taking all emotions aside, the other Director is a dishonest bully and wishes to meet with me in person to discuss 'when we are re-couping our investment' (he still owes the business cash investment of several thousand).

 

[FlorenceSapphire]

Is it possible to threaten to sue your partner for not fulfilling his obligations I wonder

This is an option, however this would be costly I imagine? I have run out of cash.

 

[dotcomdude]

he still owes the business cash investment of several thousand).

What do you have to prove that he owes the company money? If you do have proof, why don't you just enforce that like you would any other debt?

 

[FlorenceSapphire]

What do you have to prove that he owes the company money? If you do have proof, why don't you just enforce that like you would any other debt?

I have written agreements and endless emails as proof (plus his abusive behaviour towards me via email, and social media). Everything is documented. These emails also contain my asking him to pay what he owes, of which is keeps giving a list of excuses as two why he can not pay 'yet'...stating 6 months dates in the future, 'if things go well'....leaving me with paying for everything and he has the nerve to ask for a meeting of 'when the business will be in profit and can re-coup his initial investment'. I have enforced him to pay 'informally'. If I go about this the legal way and he pays what he owes miraculously...this still leaves me with a very dishonest, untrustworthy bully in the company. He is also trying to tarnish my good name. It's a real mess. My priority is to keep a good relationship with the manufacturer as I have paid them a significant amount of money and do not want to let them down after years of hard work both sides. Hence, wanting to continue with the same product.