Legal rights to receive investment back.

Discussion in 'Legal' started by Casper1978, Nov 10, 2018 at 11:14 AM.

  1. Casper1978

    Casper1978 UKBF Newcomer Free Member

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    Up until three weeks ago, I was a Director of an start up import company. The founder of the company is the only other Director (and there are no other staff). I was not on any kind of payroll, and was working with him for free to establish the company. I also invested £5000, with a document stating that the money would be repaid when the company was able to do so. I don't have any shares. We both work remotely and our business relationship began to unravel as he wouldn't take my phone calls or answer my work emails. After repeated and failed attempts I made to meet to try to improve our business partnership, I phoned him to say that if he doesn't want me working with him, I shall resign. Without my knowledge, he then went onto Companies House and removed me as a Director. I have sent an email to him and the accountant, asking for a discussion to take place as to how my investment will be repaid. He has not responded to my emails. Would I have a case to take to the small claims court if he continues to not respond?
     
    Posted: Nov 10, 2018 at 11:14 AM By: Casper1978 Member since: Nov 10, 2018
    #1
  2. fisicx

    fisicx It's Major Clanger! Staff Member

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    The document says you get your money back when the company has the funds. Does the company have the 5K in the bank to pay you?
     
    Posted: Nov 10, 2018 at 11:58 AM By: fisicx Member since: Sep 12, 2006
    #2
  3. kulture

    kulture UKBF Legend Staff Member

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    It is a loan, treat it as such. This means going to court if needed.
     
    Posted: Nov 10, 2018 at 12:16 PM By: kulture Member since: Aug 11, 2007
    #3
  4. Casper1978

    Casper1978 UKBF Newcomer Free Member

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    It doesn't have funds, although it does have stock equating to this amount.
     
    Posted: Nov 10, 2018 at 12:29 PM By: Casper1978 Member since: Nov 10, 2018
    #4
  5. Mark T Jones

    Mark T Jones UKBF Enthusiast Free Member

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    There is legal present of courts enforcing this type of agreement, though it is very much on a case-by-case basis

    Be realistic, and put together a proposal that they can actually afford rather than trying to deman all of the money at once

    The courts will take a better view if you have tried to be realistic
     
    Posted: Nov 10, 2018 at 2:11 PM By: Mark T Jones Member since: Nov 4, 2015
    #5
  6. fisicx

    fisicx It's Major Clanger! Staff Member

    29,284 8,627
    They need to sell the stock to generate the cash to pay you back. Is this going to happen?
     
    Posted: Nov 10, 2018 at 2:55 PM By: fisicx Member since: Sep 12, 2006
    #6
  7. Mr D

    Mr D UKBF Legend Free Member

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    If they handed you stock equating at retail value the loan amount will that be of use to you?
     
    Posted: Nov 10, 2018 at 3:18 PM By: Mr D Member since: Feb 12, 2017
    #7
  8. Casper1978

    Casper1978 UKBF Newcomer Free Member

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    I suppose this depends whether he wants to or not.If he were obligated to by a court order then that's the only way I could see it happening.
     
    Posted: Nov 10, 2018 at 3:52 PM By: Casper1978 Member since: Nov 10, 2018
    #8
  9. Casper1978

    Casper1978 UKBF Newcomer Free Member

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    It would be of some use. Anything is better than nothing!
     
    Posted: Nov 10, 2018 at 3:52 PM By: Casper1978 Member since: Nov 10, 2018
    #9
  10. Casper1978

    Casper1978 UKBF Newcomer Free Member

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    thanks, yes I specified in the email that I am open to all possible ways of being paid back and would be happy to receive it in small amounts.
     
    Posted: Nov 10, 2018 at 3:53 PM By: Casper1978 Member since: Nov 10, 2018
    #10
  11. Mr D

    Mr D UKBF Legend Free Member

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    Don't think I've heard of a court order directing something like that happening over a debt.
     
    Posted: Nov 10, 2018 at 3:56 PM By: Mr D Member since: Feb 12, 2017
    #11
  12. fisicx

    fisicx It's Major Clanger! Staff Member

    29,284 8,627
    So the court requires then to sell the stock. 6 months later they haven't managed to sell anything. What do you do now?

    Not suggesting you don't take legal action but you need to be realistic about the possible outcomes. They could for example dissolve the company and sell the stock to pay HMRC leaving you with nothing.
     
    Posted: Nov 10, 2018 at 3:59 PM By: fisicx Member since: Sep 12, 2006
    #12
  13. Casper1978

    Casper1978 UKBF Newcomer Free Member

    6 0
    I definitely am staying realistic, and expecting that I may never get my loan back, I just don't to let him get away with this, and go away quietly, as he is expecting me to do.
     
    Posted: Nov 10, 2018 at 4:17 PM By: Casper1978 Member since: Nov 10, 2018
    #13
  14. Mr D

    Mr D UKBF Legend Free Member

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    Unfortunately you have taken a risk. Nothing to say you will get your money back.
    Hopefully you can, eventually.
    Unless he dissolves the business in which case you are one of probably multiple creditors that get a share of money, after the insolvency practitioner.
     
    Posted: Nov 10, 2018 at 4:19 PM By: Mr D Member since: Feb 12, 2017
    #14
  15. The Resolver

    The Resolver UKBF Ace Full Member

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    You need be a little difficult with him such as you need to put on record, with Companies House, the accountants and the bank, that you did not resign as director. Strictly he needed it in writing rather than just a verbal expression of conditional intent. If it came to an argument in court the time that has elapsed before you begin to dispute your resignation will be relevant.

    He can still remove you by an Ordinary Resolution at a shareholders meeting but , whilst he is the only shareholder, and may claim he had already done this ,it requires in law 28 days notice of the meeting including to yourself, even though you do not have shares. You have a right to attend that meeting and question the reasons. You should take note of all that said at that meeting. This may at first seems pointless as you cannot stop the Resolution but it will buy some time and get you round the table with him to try to reach an agreement.

    During the time you remain a director you could formally seek further information from the accountants as to the company's trading and assets to which you are entitled as director. If they blank you out you can refer to the professional body ( www.icaew.com if chartered) for refusing information to a client (ie director of the client company) as well as knowingly permitting the public to be given false information on the CH record.

    I know I usually advise against being a director when you have no shares, as you have a potential liability for events taking place whilst you remain a director, but this would just be for a short period to assist negotiation.

    Since you were not given shares the liability of the company to repay the £5,000 is clear. The suggested condition of having the funds would not likely have much legal effect. You could of course seek to liquidate the company but , whilst you would not want to incur the cost the threat may have impact especially if they owe monies also to the bank backed up with a personal guarantee from the shareholder.

    These are just provisional views on how to develop a strategy for negotiation You are welcome to send me-the_loan document If_you would_like_some more advice
     
    Posted: Nov 11, 2018 at 12:24 AM By: The Resolver Member since: Mar 31, 2006
    #15
  16. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    You could threaten to Liquidate the Company but given it is insolvent that may well play into their hands...
     
    Posted: Nov 12, 2018 at 12:36 PM By: Lisa Thomas Member since: Apr 20, 2015
    #16