aibu to ask co director of our company for the money I invested in the business back before I resign ?(46 Posts)
To summarise : she's asked me to resign from business we both set up 6 months ago. She feels I'm not investing as much time into it as her (as I have a young child and not as much free time). She's basically lined someone up to take over my role and asked me to resign. I've agreed but have asked for the money back that I invested into the company so far (set up costs etc , not amounting to much - less than £1000). She's now throwing toys out of the pram and is refusing to discuss money owed with me and obviously clearly thinks I'm bu to ask. Am I ? I'm not asking for anything else , no pay off , etc. To clarify , business not yet making a profit and neither of us were taking a salary.
What were the terms of agreement that you set up in the first place? It will depend on whatever you signed as to when - and if - you can get it back: as President says, you may well need a solicitor to untangle this one.
Is this a limited company? If so you own shares in it and you own half the company. She cant just ignore your share.
If it is just a partnership that is a different legal entity. Did you have a partnership agreement or records of what each contributed?
TBH. A solicitor is going to cost you more than its worth.
Yes wanted to avoid solicitor unless absolutely have to as know it'll cost the same as I want back. It is a limited company and I own 50 %. Thanks
for your replies.
You put in £1000, however that investment may have turned the value of the company into a greater sum of which you will Be entitled to.
Don't walk away, create a timeline with evidence (bank statements, emails), don't resign - go on sick leave, research as much of this yourself, write down points you are unclear about and then go see solicitor.
There's a difference (as I am sure you are aware) between resigning your everyday role and relinquishing your shareholding as a director. I'd be getting legal advice, but you are not bu.
You need to get legal advice.
While your company isn't making a profit, it may be worth more.
I am not sure you can demand she buys you out either. But you can sell your shares.
Is the person she is replacing you with going to buy you out or be an employee?
You do need legal advice.
If you had a 50% shareholding, with no shareholders agreement, then she has no more rights to ask you to leave, than you do her.
A shareholders agreement would have given 'drag and tag' rights for one shareholder to buy out the other, or clauses about who you could sell to.
The company itself cannot (easily) simply pay back half the share capital.
Depending on how the board is structured, the matter of your employment is separate from your shareholding. You could be dismissed, for example - but you do not forfeit your shares at the same time.
Were you given a share certificate? What does any board minute say about the amount of money you subscribed.
Was an accountant involved in forming the company?
Do you want to pull out? If it were me I would probably walk away tbh. The hassle of solicitors etc could be costly and worth the hassle. Will you remain friendly with this person?
Does she understand how companies work?
She wants you to step away and keep your 50% share? So she'll be working for you? If the other person was to come in and doesn't buy you out, your partner can only dispose of her 50%, leaving 25% each.
I'd explain this to her. You'd be willing to sell your part for X amount. It could be more than you invested if your activity has increased the worth of the compay, say, if it led to purchase of stock or more equipment, than the original investment.
So, agree on a valuation and sell your part to the new partner. Otherwise don't sign anything.
Company is officially registered with companies house - we own half each and 50% shares.
No official agreement in writing about what I put in but obviously I do have bank statements to prove it.
I'm most annoyed that she lined someone up to take over from me (behind my back ) and then told me she wanted me out. When I asked that the new person effectively 'buys into the business' and pays me what I've invested into it she got all nasty . She's now ignoring all my calls/texts and emails and is presumably just getting on with the job with the new person in place. I'm livid that she thinks I'm of no importance at all and doesn't think I'm entitled to know what's going on in my own business. It's also worth noting I've put more money in than her as she didn't have any - therefore I'm most annoyed it seems she only wanted me involved in the beginning as I had more cash than her to invest as she hasn't got a pot to piss in.
Thank her for wanting to do all the work for you and that you expect regular accounts and a 50% share of the profits. Not to mention that major decisions may require your vote. Read up the law on this and kick her arse into reality.
Unfortunately, I think you do need legal advice. You have rights (and responsibilities) as a shareholder and presumably a director - she can't ignore these.
In order to encourage entrepreneurship, companies are very cheap to form (about £10) in a few clicks online. However, they are separate legal entities, and can be costly to run compliantly -
I imagine one of you formed the company online yourself for a small fee.
Not having shareholders agreements (and I appreciate this doesn't help the OP now) is cheap at the start, but tricky when it comes to the divorce.
One thing is certain, you can't just be told to go away. Your co founder will have to find a way of getting your agreement to future major decisions, as others have said.
In reality, lots of small family companies tend to have skeletons like this in the closet - you are not alone in this regard.
Keep the shares, and then when this becomes the next internet big thing or whatever you could strike it rich
If you didn't write your own articles you are subject to the model articles at the end of the Companies Act 2006.
Topcat - keeping shares and possibly a directorship in a small company being run by someone you've fallen out with sounds risky. Directors have responsibilities.
If you won't want to resign then don't. Go in to the office (if there is one). Don't let the new person take over your role. Also send a clear letter outlining that regardless of her request, you remain a 50% shareholder and have not resigned; that you have not authorised any redistribution of shares (just in case she has sneakily filled out paperwork to say there has been a redistribution) and making clear the amount of money you invested (with sums and dates) and that you consider the value of the company to be at least xxx and you are entitled to 50% of that value. It may also be worth stating that all contacts/contracts belong to the company (as she may decide just to walk away from the business with you and set up with her new friend).
You could draft something and then go to CAB and ask them to look over it for you.
iirc the value of the shares may not be tied to the value of the company. You should have a shares document which lists the value of the shares when you purchased them. However as a Director/staff member/investor you still have rights to the assets of the company including its customers/stock, etc.
Email her to tell her that being ignored is tiresome and that you're seeking legal advice on Monday. If she has any sense she'll contact you to resolve it amicably. Cc the new person as well.
Tricksy situation. Legal advice will be costly and is the company really worth much as it is so new?
I'd be more concerned about stopping having any Directorial responsibilities - I mean was there a business overdraft/debts etc?
Could you turn up to the office and try and negotiate in person?
If it's a limited company and you own 50% then unless you transfer the shares to someone else, you will always own that 50% and be entitled to half of future dividends whether you work in the company or not. You also have the legal obligations which go along with company ownership. Your initial investment is not as important as the value of the company now and in the future.
I think you need to decide whether you want to (a) leave now or (b) keep your shareholding. This depends on the likely future value of the company. If (a) then you need to put a cash value on your 50% now and get this either as a lump sum or in installments. This doesn't have to be £1000 -- it could be less or more bear in mind your investment was made with future profits in mind, it was not a loan.
If (b) then you need to ensure that your rights will be recognised in future and you will get your 50% of dividends. Remember that the other shareholder will be unable to do things such as dilute your shareholding without your agreement. However if there are no company assets one option for them is to start a new company and stop trading with the original company, leaving you with nothing (or possibly even 50% of some debts).
Either way I think you need to visit the company accountant and make them aware of the situation. And I would send a solicitors letter advising them of your decision either (a) or (b). If they are ignoring your communications then I think you have to get a solicitor involved, unfortunately.
By the way, advice to anyone starting a business: never do 50/50 always do 51/49. It makes situations like this so much simpler.
Directors duties principally consist of the duty to file accounts and annual returns. Non compliance with those can lead to fines which can in some cases be levied on directors rather than just the company.
Unless you have specifically signed a personal guarantee for any bank borrowings, you do not have any other financial liabilities towards company debts.
Assuming the company is not engaged in any particularly risky activity (ie where there could be injury or loss of life) then being a non participating director should not expose you to huge risks in terms of prosecutions etc.
You are probably on a hiding to nothing tbh. Presumably these start up costs have been spent on the business? So the business has little cash value. If you are doing no work in business and do not relinquish your share I guess they will just set up another company. Your 50 per cent share may be worth nothing
Resign as a director, you don't want to be a director of a business that you aren't actively involved in every day.
Keep the shares, shareholding and directorship are two entirely different things. I have shares in Sainsburys, but I don't work there. It just means that I get income from dividend payments (if they issue any).
If you do resigns as a director make sure that it is recorded at companies house.
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