How to gain control of my business from my drug addict partner

Discussion in 'General Business Forum' started by Mikeg1990, Jan 16, 2021.

  1. Mikeg1990

    Mikeg1990 UKBF Newcomer Free Member

    17 0
    Hi all,

    I've been working with my best friend and business partner for around 4 years.

    It's recently come to light he is a heavy user of benzos and it's really starting to affect the business.

    My partner under the influence of drugs is incompetent to run the company. He makes poor decisions, lacks concentration and work ethic, and generally is a poor employee. He does recognize this, and wants to step back from his role.

    We have 50/50 shares in the limited company and are based in England - and money in the bank however we do not have a partnership agreement.

    I'm worried that my business partner could go way off the rails and steal cash from the company. .

    During recent conversations with my partner I have made it aware he is not working in the best interests of the business and has to stand down.

    With this in mind I would like him to stand down as soon as possible and not delay any proceedings.

    Given that this is a limited company and he is a 50% shareholder, what is the quickest and most efficient way I can gain full control of the business. How long would this process take? How do I cover myself so it does not come back and bite me in the behind?

    Any advice would be much appreciated.
     
    Posted: Jan 16, 2021 By: Mikeg1990 Member since: Apr 6, 2018
    #1
  2. Martin Patfield

    Martin Patfield UKBF Regular Free Member

    103 26
    Buy his shares.
     
    Posted: Jan 16, 2021 By: Martin Patfield Member since: May 3, 2018
    #2
  3. Mr D

    Mr D UKBF Legend Free Member

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    He resigns as a director.

    Still owns shares. So up to you and him to agree an amount for you to buy his shares from him. Or leave him with the shares.
     
    Posted: Jan 16, 2021 By: Mr D Member since: Feb 12, 2017
    #3
  4. Mikeg1990

    Mikeg1990 UKBF Newcomer Free Member

    17 0
    Thanks for the reply. I want him to resign and I want to buy his shares.

    Given that this is a limited company and he is a 50% shareholder, what is the quickest and most efficient way todo this?

    How long would this process take?
     
    Posted: Jan 16, 2021 By: Mikeg1990 Member since: Apr 6, 2018
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

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    Takes as long as negotiation takes. Or perhaps you and he cannot agree a price.
     
    Posted: Jan 16, 2021 By: Mr D Member since: Feb 12, 2017
    #5
  6. Mikeg1990

    Mikeg1990 UKBF Newcomer Free Member

    17 0
    He has accepted he needs to move on and has accepted a price for the shares.

    With this in mind, what is the quickest and most efficient way I can gain full control of the business. How long would this process take? How do I cover myself so it does not come back and bite me in the behind?
     
    Posted: Jan 16, 2021 By: Mikeg1990 Member since: Apr 6, 2018
    #6
  7. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

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    Just get him to resign as a director on paper, and transfer the share money agreement also on paper

    Might be a good idea to have a solicitor involved to draw up the papers and witness the signing
     
    Posted: Jan 16, 2021 By: Chris Ashdown Member since: Dec 7, 2003
    #7
  8. anonuk

    anonuk UKBF Regular Free Member

    325 47
    It would make sense to share the full details at the start rather than drip feeding information in reply to each post. Eg, what has been agreed and discussed up to now.

    I think the first step (and quickest to achieve) would be for him to resign as director. You can do this online with companies house. That way, he will be limited with what he can do. Next up, once he has resigned as director, speak to your bank and get him/his access removed from the company bank account. Advise them he has resigned as director and they should remove his access over the phone.

    Following the above, begin arranging the sale of his shares. You might be best off approaching a solicitor to draw up an agreement.
     
    Posted: Jan 16, 2021 By: anonuk Member since: Feb 27, 2014
    #8
  9. Mr D

    Mr D UKBF Legend Free Member

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    Buying the shares is the quickest and most efficient way to gain full control once he is no longer a director.

    Timescale is up to the pair of you. Unless you happen to have a buyer waiting in the wings champing to buy the company it does not matter if it takes a few weeks to resolve.
    Shareholders do not run companies, directors do.

    Cover yourself? Do it legally.
    Does not prevent it coming back later to bite you - but reduces impact. I recall a few times people have claimed they were conned out of shares or they should share in the success of the company they helped start....
    Rare but has happened.
     
    Posted: Jan 16, 2021 By: Mr D Member since: Feb 12, 2017
    #9
  10. Aniela

    Aniela UKBF Enthusiast Free Member

    789 105
    You need to be careful with this situation and pay for legal assistance.

    Firstly, there is nothing technically illegal about being on drugs as a director or a shareholder. It's only if it's truly affecting the company that it comes an issue in regards to being a director.

    You do mention "He makes poor decisions, lacks concentration and work ethic, and generally is a poor employee." - However, that's another issue. A lot of directors do that regardless.

    Making poor decisions and having a low work ethic is not illegal or reason not to be a director either.

    Can you prove it's the drug taking causing that? Likely impossible. Unless he's sold a £10k machine for a fiver or something stupid.

    Him stepping down as a director isn't that much of a big deal. The issue will come with selling the shares.

    I would want the share price written down by a solicitor and for him to sign it, after a drugs test has been taken so that it can be shown he was in a correct state of mind to agree. Otherwise you could end up in a situation in the future, where the company is worth a lot of money and he states that you forced him to sell his shares to you, under duress and in a situation where he was not in the right state of mind to make that decision.

    Would be a very big and expensive hole for you to get out of.

    Remember that while taking drugs is illegal, there's nothing illegal about being a "druggy shareholder" - You can't do anything about that. You have to take appropriate steps to make sure it's all above board.
     
    Posted: Jan 16, 2021 By: Aniela Member since: Mar 28, 2020
    #10
  11. Mikeg1990

    Mikeg1990 UKBF Newcomer Free Member

    17 0
    Thanks for your reply, it's much appreciated.

    To be clear, he cannot fulfill his duty's nor is he working in the best interest of the business and shareholders.

    In terms of a drugs test, though I like this idea it will not be possible at least short term.

    Coming off these drugs involves tapering down and that could last over one year.

    With this in mind what are the best options when it comes to buying the shares?
     
    Posted: Jan 16, 2021 By: Mikeg1990 Member since: Apr 6, 2018
    #11
  12. Aniela

    Aniela UKBF Enthusiast Free Member

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    You don't have a 'best' option here, unfortunately.

    If you don't want it to potentially bite you in the backside, you're going to have to wait until he's off the drugs, or in a position to sign when he's done a clear drug test.


    If you truly believe his drug addiction is so bad that he's in a position that he can not fulfil his duties or work in the best interest of the business/shareholders... how can you argue that he's in a position to make such a large decision, with sound mind, to sell his shares?

    You wouldn't have a leg to stand on.

    You would be arguing against the reason you wanted him out of the company. "He wasn't of sound mind to run or operate a business, but was of sound enough mind to sell shares at X price." - Doesn't really add up.

    There's actually more risk if he sells and stays on drugs as at some point, he's likely going to need money to fund the addiction. The sale of the shares would be an easy target to get funds.
     
    Posted: Jan 16, 2021 By: Aniela Member since: Mar 28, 2020
    #12
  13. The Byre

    The Byre UKBF Legend Full Member

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    Posted: Jan 16, 2021 By: The Byre Member since: Aug 13, 2013
    #13
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  14. The Resolver

    The Resolver UKBF Big Shot Full Member

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    There will no doubt be issues other than the share price but If he has agreed the price, then a Sale and Purchase Agreement,including a clause requiring resignation from the Board, can be drawn up quickly within days. If tehre seems difficulty in reaching agreement on all terms then mediation can help reach agreement on all terms. I specialise in shareholder mediation. You can give me a call for more details.

    I don't see a need to be concerned with whether he is of sound mind. If it is felt a belt as well as the braces of the document will help remove worry going forward then an independent valuation can amount to the belt.

    Coincidentally I have some knowledge about Benzodiazepines since I founded and led a very large claimant group action against the pharmaceutical companies. The drugs are very common but induce dependency when taken for too long a period. They are very hard to come off. I am not aware that they make people become not of sound mind in the sense of not understanding value.

    To avoid any misunderstandings, it is not illegal to take Benzodiazepines (minor tranquillisers including those originally branded Valium) .
     
    Posted: Jan 17, 2021 By: The Resolver Member since: Mar 31, 2006
    #14
  15. Stedurham

    Stedurham UKBF Enthusiast Free Member

    507 71
    if he knows he has issues, can you not as a friend help him off the drugs
     
    Posted: Jan 17, 2021 By: Stedurham Member since: May 11, 2018
    #15
  16. Aniela

    Aniela UKBF Enthusiast Free Member

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    Maybe your memory doesn't serve you very well... because some of the most common side effects of benzodiazepines are confusion and memory problems. Most probably some of the reasons this person is not very capable of being a director.

    I remember when I was much younger I had to go on them for a little while. Awful things. I was essentially on another planet when I took them. I remember I took a double-dose by accident one evening and could hardly move and function correctly.

    Extremely relaxing and calming but scary at the same time.

    Could see why people got addicted to them and had to take myself off them as I could feel I was going to get addicted to them myself.
     
    Posted: Jan 17, 2021 By: Aniela Member since: Mar 28, 2020
    #16
  17. Aniela

    Aniela UKBF Enthusiast Free Member

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    With a drug addiction, it's never that simple unfortunately. Extremely rare that a friend can help a friend of drugs, if not near impossible.

    It's a physical and mental dependency.
     
    Posted: Jan 17, 2021 By: Aniela Member since: Mar 28, 2020
    #17
  18. Stedurham

    Stedurham UKBF Enthusiast Free Member

    507 71
    totally disagree, had an employee addicted to cocaine and started tacking heroine, it wasnt easy but still to this day he thanks me were are still good friends, he broke down when he left, but it was for best reasons nearer home better hours for him and family. Im god parent to both his kids and we meet up regularly pre covid.
     
    Posted: Jan 17, 2021 By: Stedurham Member since: May 11, 2018
    #18
  19. Aniela

    Aniela UKBF Enthusiast Free Member

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    Disagree all you want but you can't take your extremely rare experience and believe that it applies to a large amount of people, as if it's rather simple thing to do.

    Drug addiction is serious and and an extremely difficult thing to come off, even with professional and medical assistance.

    Most people can't even stop eating junk food to lose weight, let alone battle an addiction to drugs.
     
    Posted: Jan 17, 2021 By: Aniela Member since: Mar 28, 2020
    #19
  20. The Resolver

    The Resolver UKBF Big Shot Full Member

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    Take your point but to have a court overturn a sale of shares on the grounds that the transferor was not of sound mind so as not to be able to understand the value at which the shares are being sold, the point I was addressing, requires evidence of a far more severe condition than the side effects (severe as they are) associated with tranquilliser addiction.
     
    Posted: Jan 19, 2021 By: The Resolver Member since: Mar 31, 2006
    #20