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AIBU?

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Original poster

To stick to terms of agreement with friends

265 replies

Bungybungy · 14/03/2024 10:05

Burner account. I’ve been friends with F for decades. She had a large social media presence. I’ve worked hard to establish my business and have been successful. I’m proud of what I’ve achieved. 5 years ago, F came to me with a business idea, wanting to set up herself. She didn’t at that time have the funds to set up by herself so I agreed to invest a not insignificant sum in return for 20% of the business. She was happy with that deal, and because I work in legal services, I got our guy who deals with contracts to draw up an agreement specifying what rights and responsibilities etc. Although this was an area she had worked in before, she had never actually run a business before. I guess that’s why she came to me in part, so it wasn’t just about the money. To her credit, and using my advice, the business has grown quickly and is well known. At the time of the investment I understood that I could just as easily have lost my money completely.

Our relationship is now very difficult as I’ve realised over the last 2 years that she’s been distancing herself from me, which is fine, relationships come and go, but last week I got a letter from her solicitor telling me that she was unhappy with my ownership and that she wanted to buy me out for just over my initial investment. Given the business is now worth several times over my initial investment, I can’t accept that (she put close to no money in herself). For her to pay me off would cost her 5 times my initial investment. AIBU to expect her to honour the agreement? I know she’s contractually bound but she’s been so vile about this, I’m second guessing myself. She keeps threatening to “out” my business via her social media(I have no idea what this means). I’m actually scared about what she could do.

OP posts:
Cariadm · 17/03/2024 00:46

Bungybungy · 14/03/2024 10:44

I think the problem is, due to her social media following, she is quite used to getting lots of stuff for free, I mean, ridiculous amounts of press/ad things. She’s so used to people giving her things she can’t understand why I won’t.

I think you have hit the proverbial nail on the head OP as the apparent 'entitlement' seems to be the overriding factor for her childish and naive, not at all pleasant behaviour?! 🙄She sounds like the epitome of every self centred, narcissistic, mouthpiece seen on so many Youtube channels! 😱
How she could ever imagine that as everything was legally set up at the onset she can now just casually dictate on her terms what happens now and expect that you will concur without a squeak is just unbelievable...the cheek apart from anything else!! 😳
As others have said put it all in the hands of a solicitor, do NOT interact with her at all, let her stamp her feet and make silly threats that she probably knows won't hold water anyway in reality although you haven't made clear what she is threatening to make public? 🤔
You must take the moral high ground which by the sound of it you're standing on anyway?! 😡

RadFs · 17/03/2024 00:30

Bungybungy · 14/03/2024 10:05

Burner account. I’ve been friends with F for decades. She had a large social media presence. I’ve worked hard to establish my business and have been successful. I’m proud of what I’ve achieved. 5 years ago, F came to me with a business idea, wanting to set up herself. She didn’t at that time have the funds to set up by herself so I agreed to invest a not insignificant sum in return for 20% of the business. She was happy with that deal, and because I work in legal services, I got our guy who deals with contracts to draw up an agreement specifying what rights and responsibilities etc. Although this was an area she had worked in before, she had never actually run a business before. I guess that’s why she came to me in part, so it wasn’t just about the money. To her credit, and using my advice, the business has grown quickly and is well known. At the time of the investment I understood that I could just as easily have lost my money completely.

Our relationship is now very difficult as I’ve realised over the last 2 years that she’s been distancing herself from me, which is fine, relationships come and go, but last week I got a letter from her solicitor telling me that she was unhappy with my ownership and that she wanted to buy me out for just over my initial investment. Given the business is now worth several times over my initial investment, I can’t accept that (she put close to no money in herself). For her to pay me off would cost her 5 times my initial investment. AIBU to expect her to honour the agreement? I know she’s contractually bound but she’s been so vile about this, I’m second guessing myself. She keeps threatening to “out” my business via her social media(I have no idea what this means). I’m actually scared about what she could do.

Stick to your guns don’t let her getaway. Out of curiosity how much did you invest? You should have also asked for more shares then

wasieverreallyhere · 16/03/2024 23:44

andHelenknowsimmiserablenow · 14/03/2024 10:31

Get your solicitor to issue a cease and desist letter regarding her threats immediately.

You are an investor let her out herself if need be

MaybeRevisitYourWipingT3chnique · 16/03/2024 21:55

If the business HAD failed and your investment become worthless, would she have made sure that she paid you your money back 'because you're friends'?

How could she possibly believe that people invest in businesses in the hope of, at best, only getting their original money back, but also with the real possibility of losing the lot? Why would anybody ever do that?

And she's conveniently ignoring the fact that her 80% has also grown by the same magnitude as your 20% - all the time painting herself as the impoverished, taken-advantage-of little church mouse.

Viewsaremyown · 16/03/2024 21:38

Just follow the law and point out to her that you are doing so and if she were to do otherwise then it would reflect very badly on her business, not yours, and ‘outing you’ on social media could really backfire for her.

Atethehalloweenchocs · 16/03/2024 21:34

Cheering you on OP. It also occurred to me that you have in effect invested more than once in her by not taking dividends but allowing them to be plowed back into the business over the years. I would absolutely make it a condition that she does not defame you and have this as part of the dissolving on the contract - with penalties if she does. And get ahead with it on SM. I might be tempted to say that you have always dealt with these situations in the past by mutually agreed terms, but given her unreasonable behaviour, you have had no choice but hand it over to your legal team.

BigBrotherDoesntKnowWhatACelebrityIs · 16/03/2024 21:26

Please keep us updated OP. We are all v invested!

Helen1625 · 16/03/2024 21:20

Bungybungy · 14/03/2024 10:22

5 times the investment is what my share of it is approximately worth now

I think she's just got greedy, she's seen that her business is flourishing, she's seen the £££ signs and thought now would be a good time to give you back the initial investment and pocket the rest. I mean, you are 'friends' after all and there's no way you'd stick to the terms of the contract she signed, right?

She knows exactly what she's doing!
Sneaky and conniving madam. Why would she try and screw over someone who gave her the money to start up. Without your investment, would she even have a business? I doubt it.

Pupinskipops · 16/03/2024 20:50

If she's contractually bound, deal directly with her solicitor only. Keep it out of the friendship. You might lose the friendship but if she's being that vile it doesn't sound like a friendship worth saving.

I imagine her that to "out" your business is an empty threat, particularly if you don't know what she could have on you. She will know that that could open the door to a public attack on her own business practices if you were so inclined (I'm sure you're not!) as you actually do have something on her, and her unwillingness to honour the terms of contracts she enters into.

HappiestSleeping · 16/03/2024 18:58

Bungybungy · 16/03/2024 18:28

Thanks to all for the advice. I think that now it’s in the hands of lawyers I won’t comment further save to say I’m not going to roll over and give her exactly what she wants. There are some restrictions that I won’t go into detail about and the business is not at all tied to her “identity” so we could, if needs be, get someone else into run it. This is not the first time I’ve invested in family or friends. Maybe I’ve been lucky but in the past I’ve always experienced a mutually respectful business relationship separate from our other relationships. In fact, most have gone on to buy me out on favourable terms to the other party(parties) with my blessing and backing going forward. This is entirely different. I’ve been met with outright accusations that I’ve abused our friendship. Never again. I just need a good old mumsnet kick up the arse to help me refocus and not feel like the mega bitch she’s painting me as, which you’ve given me. Thank you 😙

People never cease to amaze me. Good luck OP, but it doesn't sound like you need it. You have definitely not abused the friendship, more like the other way around.

norma1980 · 16/03/2024 18:33

If you think she may defame you on social media you may also want your solicitor to be on alert for this and potentially make it a term of the buy out [that she won't comment on you on social media or press]?

CatMummyOf3 · 16/03/2024 18:30

Bungybungy · 14/03/2024 11:20

She has first option for market value to be established on a multiple which she had previously agreed. She’s now trying to argue that she didn’t understand what she signed and that I took advantage of our friendship to get her to sign.

So... YOU took advantage of HER by investing in her start up business, which had a risk of failing. Had it failed, you would have lost the "not insignificant amount" and she would have lost zero.
She can't be that dumb, surely?!

Her large social media following is not necessarily the advantage she thinks it is. IF they find out she is basically trying to scam you, they will dissappear rapidly!

Original poster
Bungybungy · 16/03/2024 18:28

Thanks to all for the advice. I think that now it’s in the hands of lawyers I won’t comment further save to say I’m not going to roll over and give her exactly what she wants. There are some restrictions that I won’t go into detail about and the business is not at all tied to her “identity” so we could, if needs be, get someone else into run it. This is not the first time I’ve invested in family or friends. Maybe I’ve been lucky but in the past I’ve always experienced a mutually respectful business relationship separate from our other relationships. In fact, most have gone on to buy me out on favourable terms to the other party(parties) with my blessing and backing going forward. This is entirely different. I’ve been met with outright accusations that I’ve abused our friendship. Never again. I just need a good old mumsnet kick up the arse to help me refocus and not feel like the mega bitch she’s painting me as, which you’ve given me. Thank you 😙

OP posts:
HappiestSleeping · 16/03/2024 18:27

burnoutbabe · 16/03/2024 18:21

Oh yes I agree. The company is pretty much worthless without the friends input.

Whatever the current balance sheet at companies house shows, assume it's worth 20% of that.

That isn't how selling a business works though, so in the event that the OP's former friend decides to disappear, the OP could sell the business and making it continue to generate revenue is the new owner's problem to solve.

When selling a business, the prices is based on multiples of revenue. Higher profit means a higher multiple, so as long as the time to sale hasn't been long, and the business is profitable, it could be a very viable going concern.

Whilst I don't doubt the OP's former friend put in some graft, it is unlikely she has any unique skill that another buyer may have.

mcmen05 · 16/03/2024 18:25

@Bungybungy in your first post you had said she was going to out you on social media and said you are worried.
Why are you worried

I would get out of the business but she has to give you fair price.

burnoutbabe · 16/03/2024 18:21

Oh yes I agree. The company is pretty much worthless without the friends input.

Whatever the current balance sheet at companies house shows, assume it's worth 20% of that.

AGoingConcern · 16/03/2024 18:17

burnoutbabe · 16/03/2024 18:08

You don't even need to liquidate the business. The friend just stops working for it, paying herself a big bonus first to clear out any cash.

Company stays as it is dormant (after paying off any creditors /final tax bills of course)

You now own 20% of something with zero value

Perhaps. This is a sketchier area for the friend and OP might have legal recourse, which is why I didn't get into that.

But the result is the same - if OP is valuing her share based on the idea that it continues to operate with the friend running it as usual, she's off-base. The value of the business's net assets minus the friend's continued involvement is key.

burnoutbabe · 16/03/2024 18:08

You don't even need to liquidate the business. The friend just stops working for it, paying herself a big bonus first to clear out any cash.

Company stays as it is dormant (after paying off any creditors /final tax bills of course)

You now own 20% of something with zero value

AGoingConcern · 16/03/2024 18:03

IReallyStillCantBeBothered · 16/03/2024 11:36

Then she would be cutting off her nose to spite her face.

OP is a director and has access to accounts, any payout of assets will still have to be split 80:20.

What you are describing can only happen with a one man business, this is NOT a one man business, this business is run through a registered company with directors and investors and she can’t just shut it down and transfer all assets to her new company or pay herself through salary and bonus. That is not how it works.

The one man business your talking about means only one person has 100% ownership and does all the work with no employees or investors etc, this is not the case here at all.

OP has a legally binding contract and her friend can’t just decide to make changes when it suits her. And the friendship is pretty much over so OP should ensure all communication on this matter going forward is through her solicitors.

Edited
Show quote history

Absent any specific contract terms, the friend has two (valid) options for getting out of business with OP

  1. Buy out OP if the two can come to an agreement on price for OP's 20% interest
  2. Issue notice of intent to dissolve the partnership, at which point they would begin winding up procedures and the business would be liquidated, with each taking their % share.

OP needs to figure out what she would be likely to get in the case of scenario 2. If the value of the business depends heavily on the friend's skill/reputation, that can dramatically affect the amount they're likely to receive for the business's assets at liquidation. Ultimately, a fair price to buy out the OP's 20% is likely to be 20% of the FMV if the business is liquidated plus a premium that reflects how much time & money it will cost the friend to close this business and move on to a new one without OP.

DD1963 · 16/03/2024 17:58

I think it depends if you need the money or whether you would rather have your peace of mind, only you can answer that but for me peace of mind would win out if the money is not essential.

MaybeRevisitYourWipingT3chnique · 16/03/2024 15:49

She reminds me of Moe the Bartender in The Simpsons - when the IRS catches up with him and their agents drag him out of the bar, saying "You've got to pay your taxes, Mr Szyslak", and he's screaming "BUT I DON'T WANT TO!!!"

Twilight7777 · 16/03/2024 15:09

Allwelcone · 14/03/2024 19:19

You could begin non-friendship clouded negotiations.
Or
Truly moral stance, do you need the money? Could you let it go and let her be the nasty person here? Or would you always feel bitter about it.

I guess you could refuse to be bought out at all and hang on to the 20% forever...

I think we found F 😂

burnoutbabe · 16/03/2024 11:51

The only way a company can't pay an employee /director a massive salary is if the articles or shareholders agreement prevent it of course.

People can remove directors too (unless articles prevent it again)

20% shareholders can't do much really. Just get 20% of sale price of company sold.

burnoutbabe · 16/03/2024 11:48

The company can remove assets from
The company by paying the 80% person a high salary or bonus

To be fair the company is unlikely to have many assets ie no building or physical assets -just sone cash in bank and debtors owed.

Once paid out the balance sheet is empty. All the "value" is in the future revenue streams. Which can go if the owner stops providing her services (and sets up a new company)

IReallyStillCantBeBothered · 16/03/2024 11:36

burnoutbabe · 15/03/2024 23:13

Agreed. These one person companies are easy to close down, taking the clients to another company you 100% own and paying any assets out of the company via salary /bonus.

It's huge risk here -agreeing to sell at a compromise rate between investment cost and the 5x value is probably your best bet unless the contract has sone very iron tight non compete clauses for her.

Then she would be cutting off her nose to spite her face.

OP is a director and has access to accounts, any payout of assets will still have to be split 80:20.

What you are describing can only happen with a one man business, this is NOT a one man business, this business is run through a registered company with directors and investors and she can’t just shut it down and transfer all assets to her new company or pay herself through salary and bonus. That is not how it works.

The one man business your talking about means only one person has 100% ownership and does all the work with no employees or investors etc, this is not the case here at all.

OP has a legally binding contract and her friend can’t just decide to make changes when it suits her. And the friendship is pretty much over so OP should ensure all communication on this matter going forward is through her solicitors.

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