Problem with a business partner

[mattbucksuk]

I am looking for some advice due to issues caused with one business partner. I own one business myself, it has a revenue stream and makes a net profit, I only take £10 pcm out of it as PAYE, it pays money into a pension and the rest of the money is there in the bank account so whilst it exists it does not impact my monthly budget. I have a second business, owned by four owner/directors and with six other staff and it is one of the other owner/directors who is an issue.

I am the sensible one when it comes to money, I budget well, save money every month, pay everything on time, I have no debts other than my mortgage. Two of the others are more average, they have a bit of debt, one a car on finance, the other a bit on a card that they are paying off, the only money that they save is towards their self assessment tax every month so that when the returns go in they have the money to pay the tax bill. The fourth is the one who has become an issue, he runs up debts, runs out of money before the end of the month every month, has no savings, not even the money to cover his tax bill etc.

We all have an income that currently works out after tax of £3,150 pcm, a combination of PAYE and DL which are then converted into dividend at the appropriate point, we have no benefits from the company other than a £500 pcm pension contribution. I can live comfortably with income, although of course like anyone I would rather it was higher, the other two normal directors both have wives, one has one child the other has two, they are both happy with their income, although again, we are all looking to continue grow the business to earn more.

The fourth is married with two children, his wife brings in around £2,600 pcm after tax, meaning that they have an income of around £5,750 pcm. I know their mortgage is £1,180 because I helped him with the paperwork, I know what their other bills and council tax is because I helped him with a budget, before he then kept a chunk of it hidden and now no longer budgets. All in their mortgage and bills should come to around £1,960, with around another £220 of petrol which can vary slightly, so a total of £2,180, leaving £3,570 pcm for everything else. I know food costs have risen, but he claims that it is impossible to spend anything less than £1,600 pcm on food (two adults, two primary school children, they do not eat out, they do not get takeaways) which no one else agrees with, but he will not even entertain the idea that he could cut back there. Even accounting for their insanely high spending on food that still means that they have £1,970 pcm left, yet apparently they have "nothing left" and he is accumulating debt because "you won't pay me enough".

In general I am not really that bothered by his personal financial circumstances, he has made and continues to make his choices regarding how much money he is wasting, however the issue is it is now impacting the atmosphere in the business (I am in control of the finances and will never let him jeopardise the business, so he has no access to the bank or company cards and does not have the right (articles) to sign financial contracts). He regularly complains in the middle of the month "Why I have not been paid yet?" or "My pay is late, I should have been paid by now", we have always been paid on the second to last working day (PAYE in contract, Director's Loan gentlemen's agreement) of the month yet for about a year now he claims he is being paid late and starts claiming this around 18th-22nd of the month. He also regularly brings up needing "extra dividend", he will do this in almost every director's meeting regardless of what the meeting is actually about, he will do this outside of meetings with one or more of the other directors, he will also made statements along the lines of "When am I going to get paid the additional £5,000 dividend we agreed", this will occur either when there was no additional dividend agreed or there was, but it was a lower amount and it had already been paid, he will then claim that multiple amounts were agreed, that extra amounts were agreed etc. All director's meetings are minuted, all financial agreements only happen when our accountant has been in to confirm the impact of them and then documents this back to us so there is always a paper trail. He will sometimes claim that he has "a letter" or "an email" that states he should get the extra dividend, but never produces this, nor will he say who has sent it to him, he will just keep claiming he has "a letter about my extra dividend".

Today we have had a hysterical tantrum from him in the office because despite our tax returns being done back in April, when the other three of us paid them it now transpires that he did not pay his and has "no money" to pay his tax bill, he also claims he cannot afford to pay his mortgage (not due until 4th Feb) as there were "unexpected costs in early January" and that "I immediately need the £8,000 additional dividend that was agreed", there was no additional dividend agreed, nor was it even discussed. I am now beginning to think that he has lost the plot, the staff think he is mentally unstable.

We (the three other directors) said a straight no to £8,000, we said he could take an agreement to pay with HMRC, however if he was genuinely in a position where he might default on his mortgage we could look at an additional dividend to cover just the mortgage payment, but only on the basis that the accountant conducts a full financial audit of all his spending over the last year, works out a solid budget and that any additional amount this month is reduced from the amount paid over the next two, so everything balances by the end of the financial year. He has now had a tantrum, screaming and shouting and has gone home, apparently "you don't understand", "It's not fair", "I need my money" and we are being unreasonable (though he used far more colourful language) in expecting him to open up his finances to scrutiny, it was pointed out that if you want the company to intervene in his finances then the company should have visibility of them.

The accountant said that professionally he cannot advice, although off the record we need to find a way to get rid of the troublesome director before he causes even bigger problems. One of the other directors things we should try and help him, suggesting counselling, getting his wife and parents involved etc. the other director thinks we should offer him an exit package and make it some kind of ultimatum and I am on the fence, although I favour laying down the ground rules very firmly regarding his outbursts and behaviour in the office as well as trying to find some way to stop him constantly bring up finances.

I admit there is a bit of a wall of text there, but anyone with any advice would be appreciated. I know the company is at a point where we will need to take some significant action to deal with him, I just want to make sure I have all the options before we have to pull the trigger.

 

[Paul Kelly ICHYB]

You have a few options, but I assume you are all 25% shareholders? Also, what they do in the business and how important they are to it is relevant.

All directors can sit together and discuss the issue like grown ups, where you make it clear that things need to be sorted and the business cannot be affected.

You can offer to buy them out or a part of their shares to generate them some quick revenue, but, ongoing, their return will reduce (lower dividends).

You can offer to help them short term and adjust payments accordingly.

You can vote them off as a director and they will have no say in how things develop.

There are also options like closing and restarting the business, but I guess that is too far a step at this stage.

Bottom line is that you all need to discuss the issue together and agree a solution.

 

[pentel]

Does he have some sort of addiction? Gambling for example?

 

[HFE Signs]

Sorry to here of this, it sounds rather difficult.

Do you need this person, is he valuable as a member of the company? If not as above, explore the possibility of buying his shares between the remaining three. It sounds like he lives beyond his means and is unlikely to change.

For him personally, is he capable of earning that kind of money elsewhere? It might be worth sitting down with him on a one to one and asking what he really wants to do, he could be much worse off than he is right now.

Another consideration to taking more money as dividends is that you will go over the tax rate threshold and his personal tax will be higher. If he draws extra dividend then the rest of you should also.

 

[bodgitt&scarperLTD]

He sounds like a school leaver, not a director for God's sake! You shouldn't have to be working out his personal finances. And as for asking 'when's payday'.....

You're going to loose the respect of your staff over this if you don't act soon. The business sounds like it generates reasonable income. Make him an offer he can't refuse (and make sure he's hungry beforehand if you know what I mean) and then move forward with the three of you.

Out of curiosity, what is the business? I'm picturing some kind of tradesman partnership with some employees?

 

[Newchodge]

I am looking for some advice due to issues caused with one business partner. I own one business myself, it has a revenue stream and makes a net profit, I only take £10 pcm out of it as PAYE, it pays money into a pension and the rest of the money is there in the bank account so whilst it exists it does not impact my monthly budget. I have a second business, owned by four owner/directors and with six other staff and it is one of the other owner/directors who is an issue.

I am the sensible one when it comes to money, I budget well, save money every month, pay everything on time, I have no debts other than my mortgage. Two of the others are more average, they have a bit of debt, one a car on finance, the other a bit on a card that they are paying off, the only money that they save is towards their self assessment tax every month so that when the returns go in they have the money to pay the tax bill. The fourth is the one who has become an issue, he runs up debts, runs out of money before the end of the month every month, has no savings, not even the money to cover his tax bill etc.

We all have an income that currently works out after tax of £3,150 pcm, a combination of PAYE and DL which are then converted into dividend at the appropriate point, we have no benefits from the company other than a £500 pcm pension contribution. I can live comfortably with income, although of course like anyone I would rather it was higher, the other two normal directors both have wives, one has one child the other has two, they are both happy with their income, although again, we are all looking to continue grow the business to earn more.

The fourth is married with two children, his wife brings in around £2,600 pcm after tax, meaning that they have an income of around £5,750 pcm. I know their mortgage is £1,180 because I helped him with the paperwork, I know what their other bills and council tax is because I helped him with a budget, before he then kept a chunk of it hidden and now no longer budgets. All in their mortgage and bills should come to around £1,960, with around another £220 of petrol which can vary slightly, so a total of £2,180, leaving £3,570 pcm for everything else. I know food costs have risen, but he claims that it is impossible to spend anything less than £1,600 pcm on food (two adults, two primary school children, they do not eat out, they do not get takeaways) which no one else agrees with, but he will not even entertain the idea that he could cut back there. Even accounting for their insanely high spending on food that still means that they have £1,970 pcm left, yet apparently they have "nothing left" and he is accumulating debt because "you won't pay me enough".

In general I am not really that bothered by his personal financial circumstances, he has made and continues to make his choices regarding how much money he is wasting, however the issue is it is now impacting the atmosphere in the business (I am in control of the finances and will never let him jeopardise the business, so he has no access to the bank or company cards and does not have the right (articles) to sign financial contracts). He regularly complains in the middle of the month "Why I have not been paid yet?" or "My pay is late, I should have been paid by now", we have always been paid on the second to last working day (PAYE in contract, Director's Loan gentlemen's agreement) of the month yet for about a year now he claims he is being paid late and starts claiming this around 18th-22nd of the month. He also regularly brings up needing "extra dividend", he will do this in almost every director's meeting regardless of what the meeting is actually about, he will do this outside of meetings with one or more of the other directors, he will also made statements along the lines of "When am I going to get paid the additional £5,000 dividend we agreed", this will occur either when there was no additional dividend agreed or there was, but it was a lower amount and it had already been paid, he will then claim that multiple amounts were agreed, that extra amounts were agreed etc. All director's meetings are minuted, all financial agreements only happen when our accountant has been in to confirm the impact of them and then documents this back to us so there is always a paper trail. He will sometimes claim that he has "a letter" or "an email" that states he should get the extra dividend, but never produces this, nor will he say who has sent it to him, he will just keep claiming he has "a letter about my extra dividend".

Today we have had a hysterical tantrum from him in the office because despite our tax returns being done back in April, when the other three of us paid them it now transpires that he did not pay his and has "no money" to pay his tax bill, he also claims he cannot afford to pay his mortgage (not due until 4th Feb) as there were "unexpected costs in early January" and that "I immediately need the £8,000 additional dividend that was agreed", there was no additional dividend agreed, nor was it even discussed. I am now beginning to think that he has lost the plot, the staff think he is mentally unstable.

We (the three other directors) said a straight no to £8,000, we said he could take an agreement to pay with HMRC, however if he was genuinely in a position where he might default on his mortgage we could look at an additional dividend to cover just the mortgage payment, but only on the basis that the accountant conducts a full financial audit of all his spending over the last year, works out a solid budget and that any additional amount this month is reduced from the amount paid over the next two, so everything balances by the end of the financial year. He has now had a tantrum, screaming and shouting and has gone home, apparently "you don't understand", "It's not fair", "I need my money" and we are being unreasonable (though he used far more colourful language) in expecting him to open up his finances to scrutiny, it was pointed out that if you want the company to intervene in his finances then the company should have visibility of them.

The accountant said that professionally he cannot advice, although off the record we need to find a way to get rid of the troublesome director before he causes even bigger problems. One of the other directors things we should try and help him, suggesting counselling, getting his wife and parents involved etc. the other director thinks we should offer him an exit package and make it some kind of ultimatum and I am on the fence, although I favour laying down the ground rules very firmly regarding his outbursts and behaviour in the office as well as trying to find some way to stop him constantly bring up finances.

I admit there is a bit of a wall of text there, but anyone with any advice would be appreciated. I know the company is at a point where we will need to take some significant action to deal with him, I just want to make sure I have all the options before we have to pull the trigger.

He is your business partner. You are not his mother. Tell him there is no chance of any further money whatsoever being made available and recommend external support. All the irrelevant stuff above about you being sensible and the others managing to budget and the minutiae of what he spends his money on is very worrying. It is none of your business. Tell him so.

 

[The Byre]

The money must be going somewhere! After expenses, he and his wife and two children are living on c.a. £43,000 p.a. That is twice as much as they really need.

So it has to be either drugs or gambling - or both!

Is it him, the wife, or are they both at it?

 

[HFE Signs]

Too many people live beyond their means, my first ever boss was like a dad to me, he always said 'you can only measure wealth by the fewness of your wants'.

You have some good advice above, its not your job to manage his personal finances.

 

[mattbucksuk]

You have a few options, but I assume you are all 25% shareholders? Also, what they do in the business and how important they are to it is relevant.

All directors can sit together and discuss the issue like grown ups, where you make it clear that things need to be sorted and the business cannot be affected.

You can offer to buy them out or a part of their shares to generate them some quick revenue, but, ongoing, their return will reduce (lower dividends).

You can offer to help them short term and adjust payments accordingly.

You can vote them off as a director and they will have no say in how things develop.

There are also options like closing and restarting the business, but I guess that is too far a step at this stage.

Bottom line is that you all need to discuss the issue together and agree a solution.

Yes, all equal shareholders. The bottom line is trying to get him to sit down an have a rational discussion, trust me I have tried, as have the other two directors and we have done together as well. To me the solution is obvious, he needs to stop wasting money, get his personal finances under control and he needs to behave like an adult with responsibilities, however he is refusing to do that and I do not have the means to force him to behave.

 

[Newchodge]

Yes, all equal shareholders. The bottom line is trying to get him to sit down an have a rational discussion, trust me I have tried, as have the other two directors and we have done together as well. To me the solution is obvious, he needs to stop wasting money, get his personal finances under control and he needs to behave like an adult with responsibilities, however he is refusing to do that and I do not have the means to force him to behave.

You, presumably have the means to remove him as a director?

 

[mattbucksuk]

Does he have some sort of addiction? Gambling for example?

The money must be going somewhere! After expenses, he and his wife and two children are living on c.a. £43,000 p.a. That is twice as much as they really need.

So it has to be either drugs or gambling - or both!

Is it him, the wife, or are they both at it?

Too many people live beyond their means, my first ever boss was like a dad to me, he always said 'you can only measure wealth by the fewness of your wants'.

You have some good advice above, its not your job to manage his personal finances.

From what we all know, things he has left open, reading between the lines etc. we think the problem is him and his wife is not aware of the state of his finances. She saved up and bought a car for herself for example because "I don't really like debt" which we thought was an odd commend because we know he is carrying £20k+ of unsecured debt.

His problem seems to be that he is desperate to "be the man" and provide for his family, but to do it beyond his means, so he is constantly spending more than he is earning, we think he has told his wife he earns more than he does and she is not aware of the state of his finances. They are not extravagant in their expenditure, but there does seem to be a chunk of some keeping up with the Jonses going on, his wife went to school with some people who became and/or married high fliers, they will go along to a restaurant for lunch that costs them £300 when really they should say that they cannot afford it, he wastes money on little things and if there is a cheap and an expensive way to do something then he will choose the expensive way and then some more on top for good measure, an example would be the £400 per week that they spend just on supermarket shopping, they do not eat expensive foods (steaks, lobster, etc.) but everything they buy, from food, to toilet roll, to cleaning products all have to be branded.

One of the things that makes it harder is that we do not actually know where the money goes, even accounting for their wastefulness there should still be plenty left over. There does not appear to be a drug or gambling problem (we know he buys 2-4 tickets to every Lotto and Euromillions draw, but are fairly sure he does not gamble apart from that from what we are aware.

 

[mattbucksuk]

You, presumably have the means to remove him as a director?

Yes we do, the other three of us could call an EGM and remove him, that dose feel somewhat of a nuclear option though one we are getting more and more prepared to use.

 

[mattbucksuk]

He is your business partner. You are not his mother. Tell him there is no chance of any further money whatsoever being made available and recommend external support. All the irrelevant stuff above about you being sensible and the others managing to budget and the minutiae of what he spends his money on is very worrying. It is none of your business. Tell him so.

I agree I should not have to parent him, the reason that I mention it is different mentalities and I know that causes some issues, he constantly claims that "you don't understand" whenever finances come up, he has said to one of the others that we are unable to understand as "you are different".

I largely agree it is none of my business, my point would be that if he wants the company to assist him with his personal finances he is making it my business, so he can either shut up about money, or open the thing he wants fixed to scrutiny.

 

[mattbucksuk]

He sounds like a school leaver, not a director for God's sake! You shouldn't have to be working out his personal finances. And as for asking 'when's payday'.....

You're going to loose the respect of your staff over this if you don't act soon. The business sounds like it generates reasonable income. Make him an offer he can't refuse (and make sure he's hungry beforehand if you know what I mean) and then move forward with the three of you.

Out of curiosity, what is the business? I'm picturing some kind of tradesman partnership with some employees?

He feels like one sometimes, this is a man who is nearly fifty, yet approaches money like a small child. It is frustrating but he was not like this before we set up the business, nor for the first few years, he seemed to get worse with finances from 2018 onwards and the last twelve months he has become a total mess.

The staff thankfully understand that we are in a difficult position but yes I feel that we also have to act for their sakes, the tantrums alone make him difficult to have around.

I get what you mean, that is one of the discussions the other three of us have had, wait until he is on the verge of complete financial collapse before offering him £20-40k to walk away, the gamble is that he does not take it though. It also requires us to let things get worse before they can get better.

We work in a specialist area of marketing, the industry is one where many people know each other, I think he would have to work in a different sector if we find a way for him to leave.

Sorry to here of this, it sounds rather difficult.

Do you need this person, is he valuable as a member of the company? If not as above, explore the possibility of buying his shares between the remaining three. It sounds like he lives beyond his means and is unlikely to change.

For him personally, is he capable of earning that kind of money elsewhere? It might be worth sitting down with him on a one to one and asking what he really wants to do, he could be much worse off than he is right now.

Another consideration to taking more money as dividends is that you will go over the tax rate threshold and his personal tax will be higher. If he draws extra dividend then the rest of you should also.

He was a valuable member, or at least a hard worker, he was a very good account manager/director, but has spent the last five years coasting, albeit that still delivered reasonable performance but his role is certainly not one that could not be taken over by the other directors and/or employees, he has no special skills or insight.

He is not capable of earning the kind of money he currently does elsewhere no, as an account manager covering a similar client turnover he would be on half of what he is, possibly less, he also would not get the level of flexibility that he has now. If he were a salaried employee he would be on less than half of what he is now.

That is the reason for saying that if he gets more now he gets less for the next two months, we all always take out equally, it always balances at the end of the financial year. Trying to talk about practicalities of things does not work with him unfortunately, it used to, but now he does not seem to be able to understand them, he can only focus on wanting more money immediately.

 

[Mark T Jones]

I agree I should not have to parent him, the reason that I mention it is different mentalities and I know that causes some issues, he constantly claims that "you don't understand" whenever finances come up, he has said to one of the others that we are unable to understand as "you are different".

I largely agree it is none of my business, my point would be that if he wants the company to assist him with his personal finances he is making it my business, so he can either shut up about money, or open the thing he wants fixed to scrutiny.

You can wholeheartedly agree you don't understand. You have no need to.

As @Newchodge has alluded, this thread is packed full of irrelevance. What matters is:

- Can the company justify giving across-the-board pay rises (by whatever medium)
- Does the individual warrant a pay rise.

If the answer to both is yes, then it's easy.

If the answer to either is no, it's also easy.

 

[MBE2017]

I think like other forum members, going on past experience, I would not be surprised if you find your problematic director is much more in debt than you realise, and eventually you will most likely find he is a drug addict, alcoholic or has a gambling addiction.

Personally I would force the issue to get to the bottom of things. Hold a director only meeting somewhere away from the company, explain no more money will be forthcoming, and offer to help with any private referrals he might need. I would also explain if he cannot stop being disruptive he stands every chance of losing his directorship.

Hopefully he might open up in private, but desperate people resort to doing stupid desperate things, such as fraud etc. Your director sounds very desperate to myself, be careful.

 

[The Byre]

From what we all know, things he has left open, reading between the lines etc. we think the problem is him and his wife is not aware of the state of his finances. She saved up and bought a car for herself for example because "I don't really like debt" which we thought was an odd commend because we know he is carrying £20k+ of unsecured debt.

My 30 cents worth would be to find an opportunity to let her know what is going on.

If they want to be rich, they have to start thinking like a rich person - and that means living well within their means. My friends and acquaintances seem to think I am rich because I live in a large house in 20 acres of grounds - but here's the kicker - no debts whatsoever.

He can have a nice house that is fully paid for or he can have debts. You can't have both. He lives on about £42k a year. My wife and I live on £20k. We shop at Lidl and Aldi only. If they don't have it, we don't eat it! Busta!

Warren Buffett lives in a house he bought in the 60s, drives a used SUV and his company Berkshire Hathaway (the sixth largest by capital in the world) occupies the same offices since about 1970. That's the lifestyle he should be emulating if he wants to become rich - not hanging out with wasteful 'friends' who think a meal can cost £300 and only shop at Fortum & Mason.

I despair of people like that and I would not want one as a fellow director!

 

[IanSuth]

My 30 cents worth would be to find an opportunity to let her know what is going on.

If they want to be rich, they have to start thinking like a rich person - and that means living well within their means. My friends and acquaintances seem to think I am rich because I live in a large house in 20 acres of grounds - but here's the kicker - no debts whatsoever.

He can have a nice house that is fully paid for or he can have debts. You can't have both. He lives on about £42k a year. My wife and I live on £20k. We shop at Lidl and Aldi only. If they don't have it, we don't eat it! Busta!

Warren Buffett lives in a house he bought in the 60s, drives a used SUV and his company Berkshire Hathaway (the sixth largest by capital in the world) occupies the same offices since about 1970. That's the lifestyle he should be emulating if he wants to become rich - not hanging out with wasteful 'friends' who think a meal can cost £300 and only shop at Fortum & Mason.

I despair of people like that and I would not want one as a fellow director!

last person i knew like that had an issue with fruit machines - would go to the pub and pump £500 in whilst drinking a couple of beers

I also remember an applicant when i was a recruiter who demanded a particular salary as his wife had a certain lifestyle demand and had made it clear if he ever fell short of that she would look for other options. He could actually have lived quite well on what he was on but was chasing her dream (foreign holidays to the correct place, correct new car for her every couple of years, designer gear, kids at private nurseries etc etc)

 

[mattbucksuk]

You can wholeheartedly agree you don't understand. You have no need to.

As @Newchodge has alluded, this thread is packed full of irrelevance. What matters is:

- Can the company justify giving across-the-board pay rises (by whatever medium)
- Does the individual warrant a pay rise.

If the answer to both is yes, then it's easy.

If the answer to either is no, it's also easy.

The problem is it is not that simple because that does not deal with his behaviour, if it were that simple it would be solved, however all that means is the claims of being paid late, lies about more dividend having been agreed, tantrums multiple times a week etc.

If his finances only meant he was short of money I would not be bothered, the issue is he has become a disruption within the business and he is getting worse.

 

[HFE Signs]

last person i knew like that had an issue with fruit machines - would go to the pub and pump £500 in whilst drinking a couple of beers

I also remember an applicant when i was a recruiter who demanded a particular salary as his wife had a certain lifestyle demand and had made it clear if he ever fell short of that she would look for other options. He could actually have lived quite well on what he was on but was chasing her dream (foreign holidays to the correct place, correct new car for her every couple of years, designer gear, kids at private nurseries etc etc)

I know a guy who sadly put his entire life into a fruit machine, I mean his savings, his marriage and his house, ended up homeless

 

[mattbucksuk]

I think like other forum members, going on past experience, I would not be surprised if you find your problematic director is much more in debt than you realise, and eventually you will most likely find he is a drug addict, alcoholic or has a gambling addiction.

Personally I would force the issue to get to the bottom of things. Hold a director only meeting somewhere away from the company, explain no more money will be forthcoming, and offer to help with any private referrals he might need. I would also explain if he cannot stop being disruptive he stands every chance of losing his directorship.

Hopefully he might open up in private, but desperate people resort to doing stupid desperate things, such as fraud etc. Your director sounds very desperate to myself, be careful.

There could be more we do not know about, we can only see the visible stuff, foolishly we never insisted on visibility of credit reports as part of being a director.

I suspect that might be something we will attempt, myself and one of the other directors have tried on occasion to have a conversation with him but it always decends into him getting angry and shouting, claiming "you don't understand" and then sometimes personal insults, maybe three on one will work, maybe not, but I suppose it is worth a try.

 

[MBE2017]

There could be more we do not know about, we can only see the visible stuff, foolishly we never insisted on visibility of credit reports as part of being a director.

I suspect that might be something we will attempt, myself and one of the other directors have tried on occasion to have a conversation with him but it always decends into him getting angry and shouting, claiming "you don't understand" and then sometimes personal insults, maybe three on one will work, maybe not, but I suppose it is worth a try.

Share a car, make sure it is not his, stops him running away so easily. Time you and your other directors looked after your business, and hopefully help a colleague out at the same time.

 

[Newchodge]

There could be more we do not know about, we can only see the visible stuff, foolishly we never insisted on visibility of credit reports as part of being a director.

Why should you. It is none of your business.

 

[WaveJumper]

Personally I think its simple, you are not his nurse maid, its a company you are all running you say he's in his 50s he's not going to change and its not your problem........ sorry but stop beating around the bush its time to remove him before he damages the business

 

[mattbucksuk]

Why should you. It is none of your business.

The more I think about it because those in dire financial circumstances have a much higher propensity to resort to fraud, as other posters have indicated above. It is fairly common in some sectors, there is no reason for it not to be for directors.

 

[NickGrogan]

The problem with your friend is, or at least should be totally separate from the problem with the business.

Almost everything you've written is about your friend.

Fraud isn't an issue if you remove him as a director, block his access to emails, and phones, and don't let him in the office.

 

[mattbucksuk]

Personally I think its simple, you are not his nurse maid, its a company you are all running you say he's in his 50s he's not going to change and its not your problem........ sorry but stop beating around the bush its time to remove him before he damages the business

I think myself and the other directors probably think on balance he needs to go, it is just finding a way to do it that is not too costly and/or damaging. I suspect he will significantly overvalued his share of the business, we would be prepared to pay a bit of a premium to get him to go, but I fear he might try to extract too high a price.

 

[UKSBD]

I think myself and the other directors probably think on balance he needs to go, it is just finding a way to do it that is not too costly and/or damaging. I suspect he will significantly overvalued his share of the business, we would be prepared to pay a bit of a premium to get him to go, but I fear he might try to extract too high a price.

When you say go, do you just mean go as a director, employee and having any involvement or do you mean go, as in completely get rid of and buying his shares out as well?

 

[NickGrogan]

I think myself and the other directors probably think on balance he needs to go, it is just finding a way to do it that is not too costly and/or damaging. I suspect he will significantly overvalued his share of the business, we would be prepared to pay a bit of a premium to get him to go, but I fear he might try to extract too high a price.

Fire him as a director and employee and 99% of the problems disappear. You can buy out his shares later if you want to.

What do your articles of association say about directors and shareholding?

 

[Financial-Modeller]

You are needlessly worrying about his personal expenditure, when your duty as a director is to the shareholders of the company.

If the company will be better off without his services, that dictates his removal.

As others have said, in the absence of a policy, you can agree an orderly disposal of his shares in future.

 

[UKSBD]

You are needlessly worrying about his personal expenditure, when your duty as a director is to the shareholders of the company.

If the company will be better off without his services, that dictates his removal.

As others have said, in the absence of a policy, you can agree an orderly disposal of his shares in future.

That's what I was thinking.

If they can get rid off him cheaply and he doesn't find a job paying as much, he may then be desperate to sell the shares to them after a few months

 

[JEREMY HAWKE]

What a load of b£££££cks from all concerned on here

The only thing that matters is Is he an asset to the company
Discussing his personal circumstance's on here is ridiculous it has nothing to do with the other directors and certainly nothing to with anybody on here .

This reminds me of a Mumsnet/Pistonheads thread .What has got into this parish today?
I'm telling the Boss in the morning @Ozzy and he wont be impressed

 

[UKSBD]

What a load of b£££££cks from all concerned on here

The only thing that matters is Is he an asset to the company
Discussing his personal circumstance's on here is ridiculous it has nothing to do with the other directors and certainly nothing to with anybody on here .

This reminds me of a Mumsnet/Pistonheads thread .What has got into this parish today?
I'm telling the Boss in the morning @Ozzy and he wont be impressed

How can you possibly compare it to Mumsnet?

I didn't see a single DH, DD, DS, TTC, DTD, NN, AIBU anywhere in any posts.

 

[japancool]

I agree with @JEREMY HAWKE, although I might not put it quite the same way...

You are a director. You have a statutory duty to act in the best interests of the company. This clearly is not happening.

His personal life and finances are none of your business. You are not a charity, and you most certainly are not a lender. Giving him an effective advance and asking to see his bank statements? I've never heard such rubbish in all my life. Have you considered the personal data issues involved in that? What will you do, tell him he has to stop spending money on this and that? And then what will you do if he doesn't?

If you want to get involved on a personal basis, that's entirely up to you. But as a business, your duty is to sit down with him, explain to him how his behaviour is affecting the company, give him a chance to get himself together, and make the consequences clear if he doesn't. If he has such difficulty budgeting, point him towards StepChange or some other debt charity.

If he fails to improve, he then knows what's coming.

 

[BubbaWY]

I agree with @JEREMY HAWKE, although I might not put it quite the same way...

You are a director. You have a statutory duty to act in the best interests of the company. This clearly is not happening.

His personal life and finances are none of your business. You are not a charity, and you most certainly are not a lender. Giving him an effective advance and asking to see his bank statements? I've never heard such rubbish in all my life. Have you considered the personal data issues involved in that? What will you do, tell him he has to stop spending money on this and that? And then what will you do if he doesn't?

If you want to get involved on a personal basis, that's entirely up to you. But as a business, your duty is to sit down with him, explain to him how his behaviour is affecting the company, give him a chance to get himself together, and make the consequences clear if he doesn't. If he has such difficulty budgeting, point him towards StepChange or some other debt charity.

If he fails to improve, he then knows what's coming.

Its very easy to suggest taking the human element out of it, and deal with it purely from a business point of view as we dont know whether Matt is a long-term friend of his business partner, hence the showing of empathy.

Regardless, the troubled partner obviously has some major issues and I personally dont think its wrong to show some empathy as part of the process in trying to sort things out.

 

[Paul Kelly ICHYB]

So it has to be either drugs or gambling - o

No, it could be just living a lifestyle beyond their means!

trying to get him to sit down an have a rational discussion, trust me I have tried, as have the other two directors and we have done together as well

Try harder - make ultimatums.

He was a valuable member, or at least a hard worker, he was a very good account manager/director, but has spent the last five years coasting,

Incentivise him to grow sales/profit - if he brings in x% more business, everyone wins

 

[The Byre]

If you guys can bear the wisdom and advice from an old guy who's been there and done that, firstly the OP and his colleagues have to find out what the F has been going on. Talk to the wife - talk to the partner - just find out what the F he is doing with all that money. Chances are that he will clam up and say nothing meaningful.

Before moving to step two, get legal advice - our friend Graham @The Resolver (http://www.boardroomresolve.com/) seems a good place to start for that.

Secondly, they have to make the situation clear to the delinquent partner that if whatever is happening, they are there to help, but only to a point. They have to think of the business first and his welfare second. That means if he does not come clean, then he will lose his position as a director. He will of course remain a shareholder, but he will lose access to company emails and accounts, etc., etc.

If the situation escalates to the third step (as I suspect it must) they must firewall him and freeze him out. Let him crash and burn all by himself. They reached out to him and he refused - so it's goodbye. As he seems desperate for money, he will take any reasonable offer for his shares.

I have had situations like this plenty of times - drugs, alcohol, gambling, depression, criminal prosecution, family problems, secret (gay) lover, wife shagging around, other illnesses, blackmail, the list of interesting possibilities is long and I think I have come across most or all of them!

As long as he is in the company, his problems are your problems and therefore if he refuses to share those problems, then he must leave the company.

Use those words. Make it clear to him that he either gets back on track or goes. The three remaining partners have no choice. The decision is his and not yours.

 

[The Resolver]

I presume, as there has been no mention by the OP, that there is no Shareholder Agreement. Toolate now, but for others this is yet another example of why it is vital, especially in small companies, to have one with a clause requiring a shareholder who is dismissed/resigns as a Director and employee, to sell his shares (either to the remaining shareholders or, if there are sufficient distributable profits in the bank, to the company. ) If no SHA then he can reject any offer although one would think , given his financial circumstances, that there will be a price on which he will bite.

Although in one sense his personal difficulties are not the concern of the company, however, if ye is not removed from the Board, there might be a concern that his personal financial difficulties may eventually impact on the company in the sense of lowering its credit status. Its not my field but others here may comment.

 

[SillyBill]

Disagree that this is not a matter for the business to address entirely. Anyone who allows their personal finances to potentially start impacting on the company's finances is going to run into problems if I am involved with said company. We have a fudiciary duty to a company, start inventing conversations about the business needing to pay a dividend that didn't happen and wasn't agreed, simply because they can't live off a very healthy salary, that'd be 100% loss of trust in that moment. I can't abide by BS'ers and liars, business partnerships are based on trust. If he is making stuff up, he is not an asset to any business and you're better off shot from such people. Probably lies about a whole load of other stuff too, as liars tend to do.

Alarm bells would be ringing if I was tying my fortunes to a person who can't even run a household budget.

 

[MBE2017]

Not passing judgement since the facts are not known for sure, but IF drink or drugs, or some other form of addiction comes to light, all I would say is in my experience such issues go away, they are not solved easily.

I hope I am wrong but best of luck to you all.