Ltd Company Director Troubles

[advice please]

Myself and my partner set up a media company five years ago and while not being cash rich we have produced a substantial body of work, with many self funded projects.
It is a LTD company, we are both directors, employees and own 50 shares each, with equal start up funds.

My partner now desires to leave to pursue his own personal work, (he has already started this new venture using our work to get new projects, and maybe even trying to sell one of our projects to an existing client, I believe this is illegal?)

Unfortunately, he is demanding half of the money from our account along with exclusive rights to most of our properties and half of our equipment, in exchange for his shares and him leaving!
I would be left with VAT bills, Corperation tax bills etc and a strong desire to continue and build the company for the future.

He has taken many computer files from our studio, which he hasn't been to for the last six weeks and is now encamped at home? Speaking only through emails.

I have suggested many alternatives including visiting an independent arbiter to try and sort out our current problem, but receive no reply.

Just the same demands.

The company is currently doing well with good work coming in that he is trying to say I cannot complete without his co-operation and agreement.


Any help would be appreciated.

 

[Kent Accountant]

On this forum, I would suspect you will only get very general advice.

You actually need to see a good commercial lawyer as soon as possible to discuss your co-director's fiduciary responsibilities to the company, but it probably won't be cheap

Speak to Antonia, a member here

 

[cjd]

Yup, you need to talk to a lawyer. S/he will ask to see your paperwork - employment contracts, shareholder agreements etc.

 

[advice please]

Thanks for your swift replies, I beleive I can access the Law Society Scheme for a free 30 minute chat. Does anyone know of this?

 

[cjd]

I don't know about that one but if you are an FSB member you have free legal advice too. You may have it if you have company insurance too.

Also, the wonderful Antonia at Limeone mentioned above will help you by email for free - see:

http://www.limeone.com/home/Free_Legal_Help

 

[Cred-X]

It certainly sounds to me like he wants half of the assets but is not prepared to take on his half of the liabilities!

Cheeky !

I think you need to get the business properly valued (including all short and long term assets and liabilities. Perhaps your Accountant could help with this?

 

[advice please]

I shall contact Antonia, speak to my accountant and attempt to contact my business partner!
thanks for your help.

 

[i.m.]

You describe a situation that is unfortunately all too common, as can be seen by the number of posts I have written about this topic on the forum. With a deadlock situation, you really have to try and get the chap to see sense otherwise the business that you have both worked up will fall away whilst you are squabbling. There can be no doubt that he is acting in breach of his duties to the company and that you can have a go at him about that, but you need to consider what it will achieve. Ultimately, unless you are after him on issues of personal liability, any litigious action will merely result in an order for one party to buy the other out at an agreed valuation, which is no more than a sensible commercial person would have considered at the outset. If he needs sense being talked into him, you can certainly write a powerful letter in the circs, but dialogue must be attempted first along with the preparation of a realistic and objective valuation of the business.

Best

BR

 

[advice please]

Thank you, this is the course of action I am attempting at the moment, it's just that waiting (worrying) is disruptive to my current project, I guess I just have to take a deep breath and wait until dialogue resumes.

One problem with waiting (and carrying on working) is that any income I bring in from now on is split between us, through the company...tricky...

I understand that litigation will result in the same outcome anyhow, but at much greater cost, both personally and financially.

Hopefully we'll be able to work out something shortly and both move on.

 

[dwc]

Sounds vaguely similar to a situation I am in. If he can go off and work on his own, so can you - so long as you take care of your director's fiduciary duties in the existing company. You certainly need to take advice on how to do it and protect yourself. AIUI you can then seek to liquidate the company, ensuring all liabilities are met, and all assets are disposed of properly. Any remaining proceeds can then be split between the shareholders. .. Extreme, but one possible way forward?

 

[Moneyman]

I think you are looking in the wrong direction. He cannot demand assets or cash or whatever. They belong to the company. He certainly cant take company assets with him. He can sell you his shares but that is about it. Have a look at the memorandum and articles, it is bound to have something about dispute resolution.

 

[i.m.]

Following on from that, it needs to be you that is seen to be taking the initiative here. You could be waiting forever for the reasons that you yourself describe. He needs to understand that you are aware of your own strong position and the consequent weak position that he is in.

Best

BR

 

[advice please]

Thank you bracherrawlins and moneyman, the advice received on this board has helped me keep calm and level headed throughout this.
I have set up a meeting next week with the other director and a third party of his choosing.
Hopefully he will turn up and something will come of this.

I will continue to post any progress, resolutions, problems.

Many thanks all.