aibu to ask co director of our company for the money I invested in the business back before I resign ?

[oldboiler]

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.

At the end of the day, companies should really be run by 'grown ups' who can cope with the responsibilities of the corporate world even when they are tricky and involve a bit of negotiation (and I am meaning the co-director)

If the OP doesn't think her co-director will ever respect this, and if she also thinks the business may not in fact be the next facebook (or MN), then it might be best to try and find a way of getting some money back somehow now - and closing the chapter.

Does the company have a company secretary and accountant?

If so get a solicitor to write a simple letter asserting your ownership of the shares. Stating that you are resigning as Director.

The letter should also remind her of her continuing duties as a Director and that as you resigned you are still entitled to 50% of any dividends paid and to receive annual accounts and attend the Annual general Meeting.

That way if the company grows you will still have ownership rights and she cannot say you agree to give up your shares to her.

Personally, I would then negotiate with her to buy you out.

Why the rush to resign as a director?

A company is run day to day by the directors, not the shareholders.

Yes, the shareholders get annual accounts, but there doesn't seem to be a shareholders agreement in place.

By not being a director, the OP would have very few opportunities to control anything.

Part of the agreement to buy out should include resigning as a director at it's conclusion - not before the start.

If it's a private limited company it doesn't have to have a company secretary and is in fact unlikely to have one.

Yes there's no company secretary. It's just the two company directors so me and her.

I am having a sense of deja vu, not sure if it is me but didn't you post the same question a couple of weeks ago. If so, what has changed since then? If not, sorry.

I posted in legal about 2 weeks ago just to see where I stood with leaving the company and letting her go it alone. That was before she started ignoring all my contact with her . I can't go into the office to speak to her as there isn't one - we work from home. She doesn't answer the door when I go to hers. Now I suspect she's just planning on plodding on without me - and thinks by ignoring me she doesn't have to pay what I've asked for before I resign. She's quite a bully so I think she expected me to sign my half away without even daring to ask for the money I've put into it back.

So on formation of the company, you each bought one share for £1 I presume, and voted yourselves as directorsand. Anything you introduced to the business or paid for on behalf of the business would be deemed a director's loan - ie, the company owes you that money back. Because you each own 50%, neither has a majority to make decisions such as voting you out as director, or indeed dissolving the company (which TBH, if I had the power to do so as your partner, I'd do).

Companies require accounts filing at Companies House, and HMRC should also have been informed of its formation and will be demanding corporation tax returns after a year. Has any of this been considered? If these aren't filed in a timely manner, the director become liable, and may be charged with a criminal offence.

Something about your post makes me think these things haven't necessarily be considered, and in that respect, I'd want out. If you sell your share (which will likely have no value), and resign as director (which requires a form being filed at Companies House), then you can walk away. Is she doesn't want to pay your director's loan, she can just dissolve the company and set up anew (which is what an accountant would advise her to do).

You should both consult your accountant ASAP.

Excuse iPad typos!

Thanks Carrie. That's very useful. Can you confirm then that she can't dissolve the company without my agreement as co director ?

Exactly, as two 50% directors, one cannot legally take these actions without the agreement of the other.

Do you have anything in writing about the £999 you paid in excess of the share nominal value?

Just because the share is shown as £1 does not mean the rest of your money was a loan. It could be share premium - which is not the same as a loan.

Mind you, I would keep an eye on Companies House, in case she does file a form to strike off the company. You would then have to inform companies house that you object. If you don't do that the company would eventually cease to exist.

I suggest resigning as a Director because if she say ran up a large debt or owed money to suppliers she could be trading insolvently and all Director's would be personally liable. Although it is a Limited company, trading insolvently creates a personal liability on the Directors which of course the OP will have no control over.

Yes, I suppose - but a fairly high bar is set to make directors personally liable. No liability exists in routine insolvencies - after all that is the point of limited liability.

My point really is that the OP should not resign as a director at the start of negotiating an exit - but really should only do that as part of the agreed exit.

Sounds to me like this isn't really that much of a business right now - more of a kitchen table 'idea' at this point. I doubt it is in receipt of much in the way of trade credit or bank overdraft.

You have rights AND OBLIGATIONS OP if this is a limited company as others have mentioned. These sorts of things get picked up in background checks too, when you apply for other jobs. Even if you were 'just' a shareholder having resigned as a director if the company ended up having problems with creditors etc that you were not personally liable for there could be consequences for you. I'd make it a priority to walk away from this woman and her foray into business - she clearly hasn't a clue what she's doing.

CAB are almost certainly not going to be any help here aplaceonthecouch. I can't believe any has the funding for a caseworker dealing with this area of law. Even if one happens to have a volunteer who used to do business law before retiring or whatever, you can't give legal advice without the appropriate insurance. And legal advice is what OP would be asking for. If she wants tailored professional help, and I probably would in her shoes, she's likely to have to pay for it.

fanny I was under the impression she didn't want to pay for (or couldn't afford) a solicitor. I have a few solicitor friends who volunteered in their local CABs so thought it might be an option for her. But yes, if she can pay for a solicitor that would be best.

You're right she doesn't, but tbh if this is complex enough to require professional advice she'll probably have to.

She can't actually line anyone up to take over your role without your agreement as you are both 50% shareholders

You could resign as director but personally I wouldn't as she can't make you, tell her you have lined up someone to take over her job as you want her out and see how she reacts

If you sit tight and resign as director then you are still entitled to half of any future profits and dividends without lifting a finger going forward as you are a 50% shareholder

Out of interest what sort of business is it ?

Thanks for all your replies. I'm certainly feeling more positive that I'm not bu by agreeing to let someone else take my role in the business in return for my money back. The business is publishing - we've been producing a bimonthly magazine. Adverts fund it but we haven't been getting enough to be making a profit just yet but have just about been breaking even.

Does the company own anything at all? Computers, specific software or hardware etc... What has the money been spent on? If it's been spent on consumables she's probably chucking a strop because she can't give you what she doesn't have, if it has been spent on physical assets then you at least have 50% ownership of assets and as such she can't just claim they're not yours anymore anyway. As a previous poster says get it all down in writing and let her know you will not be resigning your position unless she commits to a formal agreement to buy back your share.