Potentially selling my business (please help)

[Mark Tindale]

I have a number of questions regarding selling my share of a small business, I would much appreciate any advice, as I am currently very worried.

My business partner has just sold his 50% of our small business. Of which I was not told anything about the buyer or the deal, Is it normal that I have no say as to who buys it? I have not been asked to sign anything or attend any meetings.

Through many hours of searching i found out that the new buyer has recently voluntarily wound another business up, owing circa 1.4 million.. this is making me worried, given I know very little about business, I feel I may leave myself wide open.

He has already decided to take all of our stock (200k) and place it in his warehouse 300 miles away. And rent the machines back to my now ex business partner, for him to charge us £45 per hour to manufacture our parts! I was not consulted in any of this.

He has offered me 20k cash for my side of the business, which I feel is a crap deal... I would very reluctantly sell for 30k.... but He only offered 5k per month for 6 month... is this type of deal normal? Would I be leaving myself open to losing everything?

Not sure if it is of any help, but we turned over 340k with 80k profit last year.

Thanks in advance for any help

 

[japancool]

My business partner has just sold his 50% of our small business. Of which I was not told anything about the buyer or the deal, Is it normal that I have no say as to who buys it? I have not been asked to sign anything or attend any meetings.

That would normally be laid out in the shareholders' agreement. Do you have one? It's quite norma; for such an agreement to state that shareholders cannot be disposed of without the agreement of other shareholders.

He has already decided to take all of our stock (200k) and place it in his warehouse 300 miles away. And rent the machines back to my now ex business partner, for him to charge us £45 per hour to manufacture our parts! I was not consulted in any of this.

How is it he has the authority to do this without your say-so, assuming you are also a 50% shareholder?

Was that 80k profit before or after directors' drawings and wages?

 

[Mark Tindale]

Thanks for the reply.

As far as I am aware we didn't have any agreement drawn up, we got the accountant to open the ltd company, and that was that.

We basically started this up as something to do in our spare time, so didn't take it too seriously, and have not taken any legal advice along the way.

I am still 50% shareholder and definitely not been asked about any of this. I will say though, we are/were sub letting half of my ex business partners factory... so maybe moving was the only feasible option going forward.

The profits were before directors drawings.

Thanks again.

 

[japancool]

I am still 50% shareholder and definitely not been asked about any of this. I will say though, we are/were sub letting half of my ex business partners factory... so maybe moving was the only feasible option going forward.

OK, but why have you let him move the stock without your say-so? Are you involved in the day-to-day running of the company?

Have you ensured you cannot be removed from the bank account without your agreement?

 

[Mark Tindale]

The stock has not gone yet, but I think he's taking it next week. This has all come about this week. I was not even given the buyers full name.

I run the sales side on the website and ebay, which I now do from home.

As the bank account was opened jointly, I dont think I can be removed, although will need to look into that.

 

[kulture]

I would tell the bank that no money can be removed without joint signing.

 

[fisicx]

The stock has not gone yet, but I think he's taking it next week.

Get over there pronto and move the stock to a new lockup.

 

[Mark Tindale]

Get over there pronto and move the stock to a new lockup.

That did cross my mind, but would probably make the company unworkable as we need to post out every day.

I hate to think what would happen if I do that, but then again also what may happen if I don't.

 

[Mark T Jones]

That did cross my mind, but would probably make the company unworkable as we need to post out every day.

I hate to think what would happen if I do that, but then again also what may happen if I don't.

Do it. Your business may need a couple of weeks downtime whilst you sort this.

Starting point, do you perchance have a shareholders agreement? If not, what do model/standard articles say on the matter?

Someone legal will know the answer.

@The Resolver will be along soon, hopefully

 

[fisicx]

That did cross my mind, but would probably make the company unworkable as we need to post out every day.

Take the business offline for a week or two until everything is sorted.

Right now what’s to stop this new partner flogging all the stock on their own website?

 

[UkAppCoder]

I hate to think what would happen if I do that, but then again also what may happen if I don't.

Right now I'd be worrying about what your partner would be doing if he happened to look in on this thread and discover what you are thinking about doing!

 

[The Byre]

It looks as if your young partner John has sold out to a pump-n-dump merchant. You obviously went into this partnership with both eyes firmly shut and you did little or no due diligence on John - I probably now know more about him than you do!

He still has one-third of another company and is probably concentrating on that. As your last filing with CH shows a net worth of just £1k, he took whatever he could get. There is obviously a great deal more to this story and if you think that there is a real loss for you with this deal, I would change the locks on your lock-up now and hope that he has not taken the stock already.

Talk to @The Resolver (Graham Ross - [email protected] 07885 728801) first thing tomorrow morning! Right now, I would check that the stock is still there!

 

[Mark Tindale]

I went into partnership after knowing him for a lot of years.

It has not been working for me lately, so i decided to sell up, which John was going to buy it. Then all of a sudden some other guy is/has bought him out.

Its just become a massive worry, i definately need some legal advice ASAP.

 

[The Byre]

I went into partnership after knowing him for a lot of years.

In which case I apologise for making assumptions - but it goes to show the dangers of partnerships and I always advise against going anywhere near them. And if unavoidable, then only with massive guarantees and solid agreements! In your case, a change of ownership should have only been made possible with the agreement of all shareholders.

If he was a friend, then it only goes to underline what John D Rockefeller said, "A Friendship founded on business is better than a business founded on friendship."

Its just become a massive worry, i definately need some legal advice ASAP.

If Graham cannot help you, he will be able to point you in the right direction. But I strongly suspect that he will definitely tell you what you can do and what you cannot do and what you need to do next.

If I knew the name of your new 'partner', I could tell you what he might be up to.

 

[WaveJumper]

And you did adopt model articles so maybe you should have a read of them

 

[Frank the Insurance guy]

You really need to have a chat with @The Resolver

Shareholders own shares in the business - this does not mean they work in the business or can make business decisions, unless they have been given authority to do so!

What authority does the new owner have to move stock and enter the business into new contracts for warehousing etc? If none, then you can block any movement of stock and void any contracts entered into by the new shareholder.

As mentioned by others above - protecting your position and moving the stock whilst you sort this out may be a wise thing to do.

As an aside - if the new shareholder is entitled to be a company director and make decisions, you will need to notify your insurance company that a company director has been involved in a previous company that has gone under owing a substantial amount of money. This may affect the cover insurers are willing to provide.

 

[Financial-Modeller]

You haven't mentioned directors, OP.

Is the new shareholder also a director?

Has the original shareholder resigned as a director?

 

[The Resolver]

As a 50% shareholder and presumably one of 2 directors originally, then the buyer of the other 50% cannot become a director without your approval on a shareholder vote. Further, under the Model Articles your agreement as a director to register (and make lawful the transfer) .is also required.

You need to take urgent action. Happy to help at least with a free 30 mn 'call. (see below)

 

[WiseProcurement]

If you made £80k profit then the business should be worth at least double that, £20k/£30k is a joke. Get the Resolver involved!

 

[The Resolver]

You must understand that if someone has paid to buy only 50% of a limited company then, even if you didn;t challenge his ownership (as you can -see my comment above) you, as owner of the other 50%, are in a very strong position to negotiate your exit. You cannot be forced to sell. Whilst you remain, your new co-shareholder cannot pass any Resolution without your agreement,. He, therefore, has no unilateral power. I suspect he has a plan to drain the company (and buy back assets) but which will rely on your failure to act,. You need to move your pieces urgently to block

 

[UkAppCoder]

And if the Resolver doesn't work, then use a Revolver.

 

[Washington]

Can you freeze the bank account until agreement is reached with the incoming buyer

As said above, it would be sensible that any money taken from the account should have agreement from both owners

It looks like nothing has been done here to take you along on the journey, so act quickly, also get the stock if you can.... Good luck

 

[japancool]

The OP hasn't been back for a few days, but I'm going to guess he doesn't have the keys to the lockup, and left that all in the hands of his former partner.

 

[The Resolver]

A partial freeze ln the account, under which no monies go out save with joint approval of all directors, may help negotiation. But whilst sometimes, in my experience, banks will do this it not only requires evidence of a fundmental divergence of views between directors as to the running of the company but a withdrawal of consent by one director to the mandate and, most importantly, a fear with the bank that they may be exposed to liablity for monies lost to the company through a breach of Directors duty and the bank's failure to act when put on notice. I can advise further on a 30 mn free call if the OP books into a call as in my sig below..

 

[dancat234]

When you say 'just' sold his share, your partner is still showing as a director at Companies House. I think as so many have indicated above, I'd be straight on that offer of a free 30 min free advice call from Graham Ross. Good luck.

 

[Browny]

Get over there pronto and move the stock to a new lockup.

get the locks changed, therefore nothing can be moved or seen without your authorisation,