To not want parents to give away half of my business?

[Bubs101]

First-time poster here! So go easy on me.

I set up a small consultancy business about 10 years ago and am doing quite well for myself now, however it hasn't been easy. My parents gave me an initial sum of £10,000 to help set things up, however, this was on the condition that they own 50%, which at the time I agreed to, as they were my parents and kindly invested in the business and me. 10 years later their initial investment has been paid off and they have been regularly receiving dividends, so have done quite well of the initial £10,000.

However, as I'm in a good place financially I asked them about buying back the shares they have, gradually, so I can have full ownership of the business, this was initially agreed that I would be able to do this when they first invested as my parents "don't want anything from me". But now this is where it gets tricky as they have now refused saying they are going to gift my brother the shares instead! As he is expecting his first DC (I have none) I'm shell-shocked and livid. My brother and I have a very complex relationship and he was physically and verbally abusive to me before I moved out, though he faced no consequences as he was the golden child who could do no wrong! My parents are aware of how I feel about my brother and we are virtually NC, except Christmas where we are civil for the sake of the family.

I'm just really upset by this and was wondering if there was a way I could stop this from happening. I've worked so hard to get my business to where it is, my brother is working but has always expected handouts and is naturally smarter than me but very very lazy so he earns about a third of what I do. I just don't want him to reap the rewards of my blood sweat and tears especially after how awfully he has treated me. I've told my parents how I feel but they are having none of it and have told me that they own half the business and are entitled to do with it as they please. AIBU in wanting to seek out some legal advice regarding this, I just fear my doing so my parents will cast me out.

You need to see a solicitor!!!

Set up a new company, to run at the same time as the current one.
As a pp said, slowly transfer clients, staff and assets.
Remember, with the current company you only pay dividends if there's money. So, after staff bonuses there might not be much left at all!
Once the new company is up and running, and there's no income in the current one you will probably have to make the staff redundant. Obvs after paying them off there will be even less money for divs.

Then dissolve the old company.

Whilst he would have to pay market value, there is nothing to stop the parents gifting the brother the money to buy the shares.
As some posters have said, letting one company die in the vine and moving clients and staff to another company is not the easy solution - you could be sued by the parents. It can be done, but there would have to be done other (‘bigger’) reasons for doing this, with the winding down of business in the first company bring an ‘unfortunate’ consequence of something else, rather than done for its own sake.
One option to look into is whether you will he potentially impacted by IR35 changes as per last budget announcements. This would give good reason to restructure activities so that you had one company doing ‘Day rate’ contracts and another company doing ‘fixed fee’ contracts. A solid ‘reasoning’ is the way forward here, but you need the advice of a very good accountant or commercial lawyer here.
Are you sure you couldn’t just pay yourself more salary, to reduce dividends to nil? That would be the easiest, and effective tax rates are pretty similar now, especially when you take into account that you only get paid for 48 weeks as self-employed versus 52 weeks pay on PAYE basis - to compere you multiply the effective paye tax rate inc NIC by 48/52 and see how this compares with your combined Corp tax/income tax rate.

How sad your own family are doing this to you.

That's appalling.

if it's difficult to wind up the company because it requires the agreement of the shareholders, then wouldn't it be possible to make the company dormant? I.e. just stop it getting and paying money. So transfer any business you have with clients to a new company, sack the staff and rehire them in the new company, sell any assets to the new company, pay out the remainder of the money as dividends or gifts or whatever and leave the old company be. No money = no profits = no dividends to anyone.
After a while Companies House will liquidate the company by default if it's been dormant too long.

The only thing you'd need to do every year is your company return and file dormant accounts (that's something you can do yourself).

Or would this be illegal?

Have been reading this with interest - I was 50% shareholder in company with now Xh - went through extremely acrimonious divorce and have issues with legal representation at time - company had a value however I was ordered to transfer my shares over to xh by judge for nil value. A lawyer since has commented this “seems a strange decision” - just wondered if anyone legal or CA on here can comment as @purplepingu has said they have to be sold at market value. I have other issues with the judge who ignored evidence.

We had a similar issue.

Our company was split 50/50 shares with a partner. Only 6 months in he was convicted of a crime and sent to jail for 6 years!

We could remove him as a director but since you cannot conduct ‘business’ in jail we couldn’t remove the shares.

Obviously I didn’t want him reappearing 6 years later and claiming half of my hard work!

We took advice and set up a parallel company, gradually switching the business over.

Just stop working through the company. It will then have no income and eventually no assets.

Set up a new company and work through that one. Simple, no drama but their shares will become worthless.

Fingers crossed this can be resolved in a relatively painless way.

As a consultancy it’s you and your staff your clients want, not X ltd. Hopefully you can set up a new company XX ltd, employ your staff there and cease trading at X ltd.

Late night update! Had a think about everything, and for the meantime, I'm going to not declare any dividends and give myself and the staff a nice little bonus and go NC with my parents. They rely on me heavily and I'm always around so maybe by not being there it might give them the wake-up call they need. I'm hoping they eventually decide to sell the shares back to me once they realise they aren't making any money and will lose me as a result. I've threatened the legal route with them and honestly don't really care if they never talk to me again. My parents have a history of being very loving one minute and then very cold and distant the next and I just don't have the time and energy to deal with their shit anymore.

Exactly as bishalisha said it’s easy to close down and re set up as it’s you personally and staff that are the business if you need to do so. You need also look with legal advice at how the contract was drawn up initially in terms of it all too.

Good for you op!

And never do the same again

really worried my parents will disown me over this, they always talk about we are a family, and that families make sure everyone is well taken care of

I would probably call their bluff.

Tell them it is getting too much for you and you are going to go and work at a minimum wage job and brother will need to help you out with some cash.

After all families help each other out don't they

OP, please look into dissolving too whilst you're taking this time out.

Good on you for deciding to go NC.

You've been treated disgustingly by your parents, not just in regards to this, but in other areas too. They're finally getting what they deserve.

You’re going to have to stay strong - don’t let them chip away at you to make sure that you stay compliant.

Remember, even if they don’t transfer the shares to your brother, there is nothing to stop them just giving him the money

Great stuff, Bubs101.

Do get legal advice also, about the best way to get your business into your own ownership with no pesky relatives involved.

Legal advice first and foremost - ALL your options, including closing the business down/declaring it bankrupt, whatever - in your position, I would 100% destroy my own business before I let an abusive family member get their hands on a penny of it.

What you're only just coming to see is that your parents are also abusive - but in a much more subtle way - emotionally abusive, financially abusive and coercive control.

See if there's a way you can start up a similar company now (AFTER talking to a solicitor) and transfer business and your staff over to the new one, leaving the old one to die a death.

And yeah - you owe your parents NOTHING. Anything they did for you has been paid back in full, and they've cancelled out all goodwill by trying to favour your abusive brother over you.

I closed my business down during my divorce due to inability to agree a financial settlement with Xh. I was 50% shareholder. I you run the business, nothing stopping you from doing this. You do need a business reason. In my case, I wanted to re-brand the company. You need to transfer assets, employees, etc, legally, so record-keeping is key. I had a new company up & running in 24 hours. Your shareholders could sue you under various company law provisos, but unlikely to do so as it costs money. My very litigious XH never went down this route, so I doubt your parents would.
For advice, I think a good accountant is more important than a lawyer (I did take some, limited, legal advice)
Get rid of the free loaders.

Moanranger

fantastic advise right there

• advice

Pleased to read to made a decision.

Surely without you- there is no business

I’d start another business and slowly wind down this particular business as it’s jyst not working out, may take a couple of years but in the lung run...

I’m incredulous that whilst these parents are gifting to their son - what are they gifting to OP their daughter? Where is the daughters gift?