I've cocked up....

[aip08]

....big style, & wondered if I might get a few opinions please.

What happened is that a person we know had a dream of starting a xx (exact products not important & left blank just in case she reads this) business selling a range of products.

She didn't have any money to start the business, but since she was such a positive person, a great saleswoman, & so passioante about it, myself & the wife agreed to go into business with her (limited comapny), we put in all of the money, & foolishly gave her half of the business on the basis that she would be the driving force & would be the one doing most of the work (ie 80%+).

She earns £425 per month basic, with the balance made up in dividends, the total amount matches the salary she earned in her last job, which was only about £550 per month. We were clear that to earn more she needed to grasp the opportunity & work at it, hard & long hours, but that she would see the rewards for her efforts because she owns half the company. We earn nothing but expected to benefit from dividends.

We thought this was very generous - she had to invest nothing to get half of the company, earns the same as she did previously, & has a bright future if she makes it work - certainly a 1000 timesbetter than the previous dead end job she had.

Anyway fast forward 4 months &......

......she's a totally different person to the one we though we knew. At first she was going to work her socks off, she'd make it work, she was a telemarketing superstar, etc, etc - what a crock! All that she wants to do is to sit in the shop, moan about there being no customers, & then complain about how hard she's working. I've asked her numerous times to use the phone to book parties, drum up business, etc, etc, but she just makes excuse after excuse as to why she hasn't done it. She has a big list of landlords & landladies that she has dealt with beofre - perfect for booking parties at their pubs - & she hasn't contacted a SINGLE ONE!

Now shes moaning that she doesn't want to do the 6 days in the shop, she wants to work less, & she moans constantly about how much she earns.

I'm getting sick & tired of her. Myself & the wife are puting in more hours each than she does on the website, etc, the wife does the parties with her, organises stock, suppliers, the accounts, etc, etc ,etc - & we earn nothing for our time or effort - all I can see is that all of the work is paying for her to sit on her arse in the shop moaning.

She started moaning & complaining from day1, although nothing major at the time, but now she moans & compalins ALL of the time about EVERYTHING (like she forgot to take a carrier bag into the shop & moaned on about it for about half an hour) - & when I say moan, I mean imagine someone compalining all the time & multiply by about 100 - its that bad.

Worse still, myself & the wife are now having other people coming up to us saying "oh, poor x, working all those days & only earning a small wage, I don't know how she does it."

It appears that myself & the wife are being painted by her as being unfair to her, as though were leaving her to run the show while we do nothing. I find this insulting & am offended after we've put a lot of money into setting her up, given her half the company, & she gets the same wage that she had before - we've given her an opportunity & she's throwing it back in our faces.

Anyway, I decided that enough was enough & that she didn't deserve to have half the company, so under the guise of easing cash flow I held a directors meeting & we all agreed to issue half of our shares back to the company, these shares were then swapped for money owed to a publishing company for stationary, prinitng, logo design, website, etc, etc (another of my companies incidentally).

I am now at the verge of wanting her out totally - but how do I do it since she has 25% of the shares of the company?

She hasn't actually paid for them, & I'm damned if I'm going to pay her for them, so what are my options?

I had debated increasing the share captial of the company from 1000 shares to maybe 10,000,000 to massively dilute her holding & hence reduce any dividends she would be entitled to. Obviously we'd have to offer the shares to existing shareholders (ourselves) at some nominal value, but since she compalins has no money she wouldn't be able to afford them - she'd then only get a 250/10,000,000 share of any profit.

Can I do this or is there a better way? Does the fact she never paid for the shares matter?

Please help, sorry for ranting, & thanks.


PS - be very careful before you go into business with friends or family.

Obvious huh?

 

[Moneyman]

Just watch it a bit. you are straying into tricky legal territory. You have to work for the benefit of all shareholders and cant just dilute someone out, if the company doesnt warrant the extra capital.
you can fire her.
i would swallow your pride and offer her a token amount for her shares and then be shot of her. the company is probably almost worthless technically and with a quick squint at the mem and articles you should be able to force her to sell after a valuation.
you can pay yourself 100% of profits as wages so she gets no dividend.
get an accountant to advise but keep a close eye on the law, it can bite hard on all directors.

 

[aip08]

Thanks moneyman, your idea is so much more straightforward & much easier too.

So if I basically work out the net assets of the business after all liabilities that are due, & calcualte a value on that?

 

[lesliedocherty]

You need to accept that you are going to come out with your name like mud.

NO matter what you say to people, you are the wrong doer and you have done over a poor employee who worked hard to build the business up, working 6 days a week for a pittance.
YOU then decide you want your 50% back, make up stuff and get rid of her.

Not saying thats the case, but thats she will paint it and as most of the people see her every day they will be lieve the victim first.

I sacked an employee for theft, still came out it the bad guy and a the local Aspexto store refuse to shop in mine as they were all friends. (my name is still mud).

Aslong as the 3 of you have had a sit down conversation where her poor performance was the reason of the meeting then you should feel better about it, if you haven't then you need to asap.

But as moneyman said, you need to think about this dilution as you are being bordering on wrong.

 

[moose88]

ouch! feel bad for you, you seem like a softy softy guy. i would have fired her in week 1! but i suppose if she is your friend/family then it can be hard.

 

[IainW]

Moneyman has hit the nail on the head, all i will add to it is that you certainly have to play everything by the book, even as you were kind at the beginning and that she was a family or a friend they won't hesitate in getting nasty to you.
We live in a compensation culture now and people naturally go for the jugular so keep you back covered 100%.

If you can operate once this is finalized i would recommend outsourcing work or having temp staff - it's a lot easier to then "get rid".

Good luck
Iain

 

[aip08]

I think I am a softy softy guy!

Leslie, we already are the bad guys. She basically embellishes the truth to get sympathy from people. I'm really angry because shes taking advantage of the fact that we're not in the shop (so people don't see the effort we put in) to make out we're slavedrivers. She forgets to mention what a fantastic opportunity we've given her.

 

[lesliedocherty]

Thats what im saying, you need to accept that there is no way you are coming out this in any good light, you will come out it as shits.

So make decisions that are right rather than trying to placate the employee, no matter what you offer her, you'll still come out as shits, it sucks but thats the way

 

[aip08]

Thats one of the most disappointing things. I didn't want her to be just an employee, I wanted her to want it to work & to work to make it happen, hence giving her a percentage of the business & making her a director.

It seems clear now though that she does just want to be an employee, working 9-5, 5 days a week, but with all of the added benefits thrown in for free.

Thanks for your comments chaps.

 

[borobabe]

Good luck. I cant advise really but do feel for you. I am working my socks off here so the total opposite of this person, and am being partly funded by my family and feel terrible about it, but they want to help me. I hope I can make them proud of me by getting a successful business going.

I hope you manage to salvage something from the situation.

 

[aip08]

Hi borobabe thanks for your comments & good luck!

Maybe we should have gone into business with you

 

[creospace]

Do you have a shareholders agreement in place?

Do you have a contract of employment in place?

First things first and all that.

 

[aip08]

No, theres no contract of employment or shareholders agreement.

 

[cjd]

You need to hold an extraordinary general meeting - and give all shareholders 30 days (I think) notice - before you can issue yourselves more shares and it needs to pass by 75% of those that vote.

I'm a bit confused about who owns what now but I suspect she still owns 50% so you have a problem with dilution - unless, of course, she doesn't turn up to the meeting.

You need proper advice though - this sort of thing can blow up your face.

 

[aip08]

Sorry its so confusing.

She originally had 50%; the wife 25%; me 25%.

We held an extraordinary meeting & voted on the changes mentioned before (documents signed by all 3 of us). We each sold half of our shares back to the business, the business then exchanged them in lieu of debt (bills) to a.n.other publishing company (owned by me & the wife).

So, she now has 25%; the wife 12.5%; Me 12.5%; The a.n.other business holds 50%.

 

[MH1]

Had a similar situation a while back, best advice is get rid, don't worry about how you are painted, people will soon forget once she has gone.

She will be doing terrible damage to the business with all this moaning and lack of effort, and lastly, never give away such a share holding again.

I don't know the technicalities so I will let the others advise on those, but in my situation I demanded full payment for the shares plus further financing as owed up to date on a smaller figure, or offerred to let the person sell their debt for £1 and walk away.

Fortunately he "chose" to walk away, but it taught me to be very careful who to work with in the future. I was trying to help an old friend get back on his feet after several years of bad luck, he was happy to sit around complaining about everything as well with no effort, thankfully I sorted things out within six months.

Six months later he would have probably pushed me into bankrupcy, as soon as I got rid of him the business doubled it's takings overnight.

 

[Eleanor]

I can't help because I don't know much about this kind of situation, but I feel terrible for you.

This person clearly wants an easy life with minimal effort. She should be ashamed of herself for treating you and your wife this way.

I'm similar to Borobabe, I guess, working like a nut case but without the funding.

You were too kind to trust her.

 

[aip08]

Thanks for your comments guys. She's coming round soon because she "really needs to talk to us" I already know its going to be "I want more."

I'll report back later as to what happens, but if she pushes her luck she'll be gone this evening.

 

[MH1]

She's coming round soon because she "really needs to talk to us" I already know its going to be "I want more."

Ask if she would like to double her money next week, and then say it's all in her hands. Very easy to award yourself a pay rise

 

[moose88]

listen man this is only as complicated as you make it. just have a meeting and make it clear that shes out. as long as you have the printing company (or who ever owns the rest of the company) on your side. end of story. end of stress.

 

[aip08]

I've found out she's been slagging us off to all & sundry since basically the day that we set the business up with our money - to help her out - & I want to make a dramatic & symbolic gesture by firing her.

Whats the requirement for firing someone. Im sure a lot of what shes done can be easily construed as gross professional misconduct. We're already painted to be a pair of c's, I want to make her see just what a c I can be when faced with basically a con artist like her.

What do you reckon? Can I get away with doing a sir Alan? It would certainly make me feel 1000% better.

 

[Jeff-Smith]

"Many people stop looking for work once they find a job."​

This whole episode is causing you too much stress and loss of business development.

My advice is to pay her off (I know that goes against the grain) and focus on what you do best. You cannot operate properly with this hanging over your head.

I think you will be pleasantly surprised when you do pay her off, it will be a huge load lifted off your chest.

I had a similar instance a few years ago and I cost me a lot of money - just pay it and get on with your life, don't let your principles get in the way of you making money and being happy.

Making the "grand gesture" of sacking her will only exacerbate the problem, prove her right to her friends and may even make things worse for you.

Once you pay her off it will all be over - life is too short to deal with this stuff.

What's 12.5% of practically nothing anyway? Is it such a big deal, a huge amount of money or is it just your principles getting in the way?

Hold a meeting, gain agreement, pay her off and get rid.

 

[deniser]

I don't think moaning and being lazy constitutes gross misconduct. You need to be VERY careful here otherwise you will face a claim for unfair dismissal.

Offer to buy her out for whatever nominal value the shares are worth. As she is so fed up she will probably jump at the chance to be out of there!

Some people are just not cut out to run a business. If she was so good at her job, why was she only earning £550?

 

[Zeno]

I think you may be suprised how much she will think her shares are worth. Very likely she has a friend who cuts the hair of the CFO of Astra Zeneca etc etc who advises her that the shares are worth £500,000 and thats a bargain.

Be prepared for a tantrum but think of you moving your business forward when the dead wood is gone.

 

[Eleanor]

Not to undo all of the great advice posted in here... but seriously... HIRE A HITMAN.

I'm only seeing your side of the story, but to be honest, it really sounds like you gave all your kindness and money to a bloody waste of time.

Her behaviour just infuriates me. I think it really proves the point that if you do nothing you get plenty, and the rest of us who work rediculous hours and spend little time with family and friends to make our businesses grow get a lot less.

Seek legal advice, ask in the legal forums and sort this out legally and professionally, and then when people start talking behind your back at least you will know the truth, and one day, so will they. Probably after they made the same mistake of trusting and believing in her.

 

[Jezclayton]

The best response is to get rid of her and then make the business work. People will soon realise who the dead wood was.

I would certainly get professional advice beforehand. Are you not members of the FSB or similar?

 

[davidshaw89]

would it not count as "damages" since she is saying foul things to the customers, she is damaging the businesses reputation, and hence potentially lowering your customer base?

I would fire them on those grounds...

you might want to get a lawyers advice before you do anything.

Good luck!

 

[peebles]

Hi

Thought I would post a smiley face before I start this! I would like to offer comments on the other side of the coin - ie hers. She has worked 6 days a week for £500 PER MONTH?! How can she survive on that? Is that legal, national minimum wage and all that? No wonder she's looking at other options, but if you say you can't increase her salary then she will be forced to look elsewhere.

I totally understand your predicament, please don't get me wrong. Unfortunately it was your money and you that got into this, you surely sought legal advice before taking up the venture? I would therefore recommend that you seek further legal advice in order to get out of it.

If you haven't set up a contract of employment then I'm not sure what the implications are for firing her. I would like to think that you can just do an Alan Sugar but these days employment law is a minefield. What you definitely don't want is a court case on your hands once she's left the firm.

What is the company worth? You say your wife is helping do parties, so you must have some turnover? How are you funding her wages?

As a shareholder with 25% she stands no chance of turning down a decision, however as someone else has commented, she does have shareholders rights, as detailed in the articles of memo. Don't dilute the shares, just seek some professional advice and get things moving that way.

Good luck! Peebles.

 

[PayVector]

Aip08,

You can dilute the shares but she will still own 25% of the diluted shares. So you dilute your class A's which hold the value of the company and turn you 100 shares into 100000000000000000000000 if you like but she still gets her 25% ( which is 25E+22 ).

You also can not pay all the profits in salary. Salary must contracted, If your company starts to make a massive profit and you change your salary to stop dividend payment you are not fullfilling your obligation as majority shareholder to the minority shareholder.

Both of the above are what are know as "Fraud against the Minority", where the major shareholder is intentional through whatever mechanism that a minority shareholder should expect to receive. Asset stripping a company is another form of this.

Your only way out is to buy her out after you have had an independent valuation. Even then she does not have to sell.

What you may consider is trying to get her to sign a shareholder agreement where there is a drag along tag along clause. Again if she is switched on she wont sign one.

What drag along clause does is after the valuation your other company could offer to buy the company. The drag along would say that is say 75% of the shareholder agree to a transaction the remaininf 25% will be dragged along and forced to sell there shares. To cover yourself legally you MUST not sell for less than the lowest valuation.

Probably not what you want to here but better to be in the know.

 

[aip08]

Thankyou very much for your excellent advise guys, hopefully we can resolve this tonight & have done.

It is very telling she has recently been off sick, & as soon as the other shop owners have realised they've got straight onto the landlady of the building, she's come straight around to see the wife (who was working in the shop) & basically said "I don't want to upset you & don't know how to say this without just coming out with it, but I do not want that woman on these premises again."

She's apparently caused so much bad feeling that the other shop owners have rebelled & demanded that the landlady tell us to get rid.


Mad or what?

 

[PayVector]

So come on Aip08..... dont leave us hanging. Tell us what happened.

 

[Christine Hough]

There has been lots of great business advice for you, and I endorse everything that has been said, but want to take a more personal approach.
It may be that the lady deliberately intended to rip you off, but it is also possible that she simply oversold herself and ended up out of her depth without the courage to come clean. The worse she felt the less she was able to approach her contacts, especially if they knew her from before. Feeling bad about herself and unable to handle the guilt she has transfered this onto you and painted you the bete noir!

So you could try something different and give her a shock. Make her watch
http://www.joycemeyer.org/OurMinistries/Broadcast/TV/Archive/20080604.htm
or send her to a Nicky Pattinson do ... at her own expense of course!

You have little to loose if she adds freak to your other traits, but looking out for her will not be the behaviour she is expecting from you, nor what she knows in her heart she deserves.

If it doesn't work, then pick yourself up on this positivity instead, you could use it to make a new start.

Very best wishes with it all

 

[aip08]

Okay guys, to fill you in....

I got the wife to call the landlady prior to this woman coming around last night, & we were gobsmacked at what we discovered - she had manipulated people so much & created so much hatred that one of the other business unit owners had agreed to go into business with her & they were looking at the legality of 2 options:

1) having us removed from our own business & when this proved fruitless

2) terminating our lease early & kicking us out so that she could take over our business unit (that we had refurbished at our cost) with the other business unit owner.

Fortunately she overstepped on the lieing part & told this lady that my wife was a junkie!!! - obviously untrue, & thats when this lady realised she had been taken for a ride & wanted to get out of dealing with her. The landlady is brilliant & worked things out for us, filling in bits here & there & putting doubts in the lunatics head.

When she came around last night we tried to play it nicely nicely which didn't work with the brass necked cow, so I blew my stack & basically told her we knew everything she'd been doing, & that she was happy to see us lose everything so that she could take the shop with someone else, etc.

The outcome after I'd smacked her with some facts was that she agreed to resign as director & employee, but she had the audacity to complain that 1 weeks pay wasn't enough & that she thought she deserved at least 2 weeks pay to go on the spot, & wouldn't sign unless we agreed.

I told her I thought after her disloyalty & all the slanderous damage she'd done to us that 1 week was too much, & that I should just fire her, & said you can either do this the easy way & sign, take the week, & try to leave with some dignity, or we'll just vote you out as a director now, fire you, & you can F off with nothing.

"well, if thats how you feel" she said !!!!

She signed off & then proceeded to cry the poor tale about how she thought those people in that building were her friends, that they were trying to help her, & that she had been "stitched up" by them.

Even at that point, having realised that we knew what she'd been doing & that we were Pd off with her, she was trying to garner sympathy as a victim & expecting some sympathy from us!


The moral of this story is to be EXTREMELY CAREFUL who you go into business with, the damage she has done to our personal & professional names, & to our business is pretty much immmeasurable.

 

[Jeff-Smith]

so is that it, is it all over now?

 

[PayVector]

Wow is all I can say.

Might be worth while speaking to lawyer and dropping a slander suite on her. She might give back the 25% she still has when faced with a legal challenge.

The old get sued or get out.

 

[Zeno]

What did happen to her 25%?

 

[Faith28]

If she resigned as director then she must have released the 25% stake of the business and left with nothing of the business except for a weeks wage...which I think is VERY generous considering the person did a lot of damage to the business and its owners.

I'm glad it's sorted now and there def. is a lesson in all of this....several actually.

 

[PayVector]

If she resigned as director then she must have released the 25% stake of the business and left with nothing of the business except for a weeks wage...which I think is VERY generous considering the person did a lot of damage to the business and its owners.

I'm glad it's sorted now and there def. is a lesson in all of this....several actually.

You do not lose ownership of shares if you resign or are fired as a Director.

Say for example you own 49% of a business. Your business partner sells his 51% controlling stake. The new owner just cant come in, fire you and take your shares. That would mean someone would only have to a a controlling stake to buy 100% ownership.

 

[Eleanor]

I'm glad its sorted and hope she has the good sense to leave everything well alone. She certainly sounds like a poisonous woman... Stay well away from her in future!!

You and your wife should go out to dinner and get some time with each other where you don't have to talk or think about this venomous woman!

Best of luck for your future in business!

 

[aip08]

Sorry,
I missed that part. I had 3 forms ready for her.
1) J30 stock transfer gifting the remaining 25% to me
2) resignation as director
3) resignation as employee

The landlady had heard that she'd been worried about being chased for money if the business had been forced to close with losses, so we gave her a letter absolving her from all losses if that should happen - obvious boll cocks since it was a limited company. She seemed to have it in her head though that being a director was what entitled you to dividends etc, & that if it shut down owing money she might be faced with a bill from us.