Help business partner attempting to kick me out

[mtsurtees]

Evening, could you advise me on what if any action I should take, regarding my business partner. We jointly formed a ltd company over 8 months ago. Profits are finally about to show. My business partner has insinuated that she would like to take over the business and go it alone and has taken council. We did not derive a solid agreement but I and my husband have drawn up the business from scratch, business plan, logo, names, contracts and so on. I have saved all original docs, I also registered the business. This has come as a horrid blow, being this is our livelihood and family security, I would be most grateful for any advice you can offer, Kind regards Tracy

 

[Strata]

Sorry to hear this, must be awful for you.

When you formed the company how were the shares distributed, are you all equal shareholers?

Can you and your husband not force the other party out by offering to buy there shares

 

[mtsurtees]

Hi,
Thanks for your response. When we registered the business online we were asked about the distribution of the shares and we stated it would be a 50/50 split. No further documentation has been generated or signed since this time.

Right now I just want to put my mind at ease that my business partner cannot take the business away or totally block me out. Any help/advice is greatly appreciated so thank you for your time.

Tracy

 

[tony84]

As 50/50 shareholders everything has to be agreed nobody has overall control.

The problem you have is if you dont get something sorted the business will suffer. Even if you do get something agreed, your always going to have something in the back of your mind as to whether or not your business partner is trying to get one over on you.

On the positive side, they cant just get rid of you.

 

[bizrep103]

Because this business is effectively a start up, your partner could just set up a newco anyway and resign from existing business.
If you only have a logo and company docs it's not really going to be worth much. Your best bet is to sell your share for a decent price to your partner and relaunch on your own.

 

[BusinessDeli]

Because this business is effectively a start up, your partner could just set up a newco anyway and resign from existing business.
If you only have a logo and company docs it's not really going to be worth much. Your best bet is to sell your share for a decent price to your partner and relaunch on your own.

Because that's exactly what she will do soon if the problem isn't sorted. Make sure you have access to the client base and read through any paperwork you have to see if there's a clause stating an employee cannot start in competition (highly unlikely and probably unenforcable anyway but she might not know that!)

As a matter of interest, what has her council said? Is there an offer on the table?

 

[mtsurtees]

I would hesitate in setting up a new business given all the hard work to build up the client base and employees for the one we have. Also part of the business concept/selling point was that it was the first of it's kind in the area we live.
I very much doubt I would get a reasonable offer from my partner but am willing to look at all avenues.

Right now is there anything I can do about my partner withholding earnings as jobs are currently controlled using the business mobile which is in their possession and they are refusing to communicate work to me. I had been taking care of invoicing but that is impossible in the current situation.

 

[tony84]

Does your business partner require your business bank to spend on items in order to earn money?

If so, get the bank to put a hold on it. Tell them their is a Director dispute and you do not want any money leaving the account unless it has authorisation from the both of you.

This will mean she has to speak to you.

I hate it when things like this happen, what was presumably a good friendship goes down the pan when money becomes involved. Lack of commmunication means the business also goes down the pan.

Either way it needs sorting, i would personally get a list of things you BOTH want to discuss and sit there and iron them out.

Have a 3rd party there - an accountant, mediator, solicitor anyone but a mutual friend. Make sure you agree to not raise voices etc - this sounds great in my head but im not sure it would actually work.

If you cant iron it out then they either need to deal with it and find ways of working together, stump up the cash to buy you out or let the business collapse. Me being me, i would personally rather see the business collapse than see someone bully me into selling it - but that might not be a viable option.

 

[mtsurtees]

The business is an agency and essentially the money in the bank is used to pay the people who work each job (on a weekly basis), this sometimes includes ourselves if we need to fill certain jobs. Invoices are then paid by our clients into same bank at the end of the month.

My partner also has a business credit card linked in with the same bank.

Thanks for your help.

Tracy

 

[tony84]

Bit too complicated for me, i still think you could do with getting your accountant down - explaining the situation (in a non biased way) asking if they would be prepared to sit in on a discussion and help with any questions that relate the financial side (which is why your in business) - see if it can be resolved.

 

[Chris Ashdown]

Have either of you signed any guarantees with the bank or anywhere else

Do you both have signature rights at the bank

Do you really want to continue knowing whats happened and could you start again on your own or with your husbands support

Whatever happens make sure you have access to both the bank and the clients lists, it is company law that directors must be given access to the books including bank details.

Sometimes these things happen when one person cannot survive on what they draw as a new company and (borrow) from the company meaning to pay it back and then feel its better to take over the company to hide the crime, this may not be the case but apears to be quite a popular line of action

Can the other director run the company without you and vice verser

Just a few things to think about

 

[Talay]

Because this business is effectively a start up, your partner could just set up a newco anyway and resign from existing business.
If you only have a logo and company docs it's not really going to be worth much. Your best bet is to sell your share for a decent price to your partner and relaunch on your own.

You can pussy foot around for months if you wish but the other party will be setting up in direct competition to the extent that you end up with nothing.

Exercise the nuclear option and grab all you can. You'll need to sort out new accounts, funding etc. and you'll need to sort out how to tackle clients.

This is not the right way to proceed but you can't always play by the book. You can get down and dirty and salvage something or you get trodden over. At the end of the day, any work you do by yourself will stand you in good stead if you do manage to sort out an amicable split.

 

[Mustaka]

What was the cause of the breakdown?

 

[mtsurtees]

The cause of the breakdown was due to a simple disagreement but I think greed played a large factor.

Things have now progressed however. When the dispute started (about 1 week ago) and my partner wouldn't respond to calls I somewhat foolishly moved some of the official business documents to our 2nd office (which is a room in my house). They have used this (probably at the advice of a solicitor) to fire me as Managing director.

I can live with this as am intending on repeating the process and start a rival business however I would very much like advice on 2 things.

1. If I am being fired as Managing Director how can I go about getting my outstanding expenses and salary that I am due from the company? I let this ride for a while due to trying to get it started but it currently amounts to atleast 5k which would be useful in setting up a new company.

2. I still own 50% shares in the company and need to know if my partner or her solicitor can do anything to get these off me.

Thank you for all you time. I am upset and annoyed about how this has turned out but take great deal that some people are out there to help and offer free advice like yourselves.

 

[Chris Ashdown]

Did they hold a shareholders meeting to take a vote on the dismissal, and as you own 50% i guess they cannot legally remove you and would also need grounds to remove you, you have as much right as the other person to work where you please and store company information


You may find that you would be classified as a employee as well as a director and if so you may have cause to claim unfair dismissal or constructive dismissal


Maybe time you took advice from a solicitor used to company law. i.e. commercial solicitor not the normal run of the mill ones who may not be up to date in this area

 

[mtsurtees]

Thanks. I think it may be a good idea to seek more advice although right now the prospect of working along side my partner does not fill me with joy and as such would accept leaving that company. Just so long as I retain my shares and am paid the money owed?

 

[BusinessDeli]

'They' have fired you? Who is they? On what grounds? If they're using the 'not acting in best interest of the business' I think they will be on very shaky ground.

Go out and find a solicitor of your own now!

 

[Chris Ashdown]

If your partnet is willing to shaft you like this then I can guarantee he will never pay you either dividends or for your shares, he will just run the company into the ground and start again with a fresh sheet of paper XXXXX (2012) ltd

 

[Blood Lust]

Evening, could you advise me on what if any action I should take, regarding my business partner. We jointly formed a ltd company over 8 months ago. Profits are finally about to show. My business partner has insinuated that she would like to take over the business and go it alone and has taken council. We did not derive a solid agreement but I and my husband have drawn up the business from scratch, business plan, logo, names, contracts and so on. I have saved all original docs, I also registered the business. This has come as a horrid blow, being this is our livelihood and family security, I would be most grateful for any advice you can offer, Kind regards Tracy

With no shareholder agreeement a court would award everything 50-50

 

[Blood Lust]

The cause of the breakdown was due to a simple disagreement but I think greed played a large factor.

Things have now progressed however. When the dispute started (about 1 week ago) and my partner wouldn't respond to calls I somewhat foolishly moved some of the official business documents to our 2nd office (which is a room in my house). They have used this (probably at the advice of a solicitor) to fire me as Managing director.

I can live with this as am intending on repeating the process and start a rival business however I would very much like advice on 2 things.

1. If I am being fired as Managing Director how can I go about getting my outstanding expenses and salary that I am due from the company? I let this ride for a while due to trying to get it started but it currently amounts to atleast 5k which would be useful in setting up a new company.

2. I still own 50% shares in the company and need to know if my partner or her solicitor can do anything to get these off me.

Thank you for all you time. I am upset and annoyed about how this has turned out but take great deal that some people are out there to help and offer free advice like yourselves.

How can you be fired you owe 50% of the shares?

Go see your solictor and start legal proceedings.

 

[StevensOnln1]

With no shareholder agreeement a court would award everything 50-50

No they would not. Being a director does not necessarily mean you own any shares at all. Documents such as annual returns will show who the major shareholders are and number of shares held by each. A company is also required to keep a register of members, which gives full details of all shares issued and who they are owned by.

 

[Chris Ashdown]

A shareholders agreement is a set of pre defined solutions to any problems the shareholders may foresee in the future so may well include what happens is a shareholder director leaves the company they may be required to sell their shares to the company or other shareholders and how the company shares value would be found

That the chairpeson may have a extra casting vote in case of equal votes

and so on

 

[Blood Lust]

No they would not. Being a director does not necessarily mean you own any shares at all. Documents such as annual returns will show who the major shareholders are and number of shares held by each. A company is also required to keep a register of members, which gives full details of all shares issued and who they are owned by.

They have said they own 50% of the shares.

 

[StevensOnln1]

They have said they own 50% of the shares.

That still bears no relevance to any award made by a court in the absence of a shareholders agreement. Having reread the thread, I can't see anyone disputing the current ownership of shares, so I can't even see what relevance your statement has in the first place.

 

[Blood Lust]

That still bears no relevance to any award made by a court in the absence of a shareholders agreement. Having reread the thread, I can't see anyone disputing the current ownership of shares, so I can't even see what relevance your statement has in the first place.

They have said they own 50% of the shares, no one is disputing that, its you who is disputing business law.

Business Law says if theres no shareholder agreement then a court must award everything 50-50. If he wants that confirmed all he needs to do is ask on the accounting section and they will tell him thats the case.

 

[Vectis]

I'd be somewhat careful before going too far down the legal route if you can help it. You say that the company is only 8 months old and just starting to realise a profit. Is there any value in the company at present or is it all in future earnings? If it's all in the future, you might be spending a lot of money with solicitors to gain what? The hope of decent profits somewhere down the line.

I'd try and suggest mediation as the first option, probably, as has been suggested, with your accountant. That way, at least, you can be given an idea of what the company is worth.

It's fairly clear you can't work with this partner so you need to find a way out which is suitable for both of you. You could easily end up spending more on legal advice than you will get out of it in the end.

I'm not saying don't take legal advice but try not to let the costs run away as you probably wont be able to recoup it with the amount you get for your share.

You could always offer to buy your partner out as an alternative and see what they say?

 

[selij]

thanks buddy for this kind information.

 

[Mediate Kate]

Hello Tracy,

How are things now? I have been reading your logs and it sounds like you are dealing with a difficult situation. As a previous blogger suggested, have you thought of mediation? it can usually be a cost effective and stress effective way of resolving disputes.

All the best
Kate