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.

Christ, what an awful situation for you OP.

I fear that some of the advice on this thread, while well-meaning, could mean you would be in dereliction of your duties as a director, with very serious consequences for you, i.e. the asset stripping.

I am pretty confident that you can't dissolve a business without the consent of the other shareholders or, even if you are a majority shareholder, some engagement with them. You wont' be able to just go and shut it down at Companies House without their knowledge, as people have suggested.

Plus - dare I say it - your parents sound like the sort who might sue you over a wrong step here.

I am hoping there is something in the Articles which states that you would have first refusal in the event of a sale of their shares. Given the size of your stake you should do.

If it's any consolation - I don't think it's going to be as simple for your parents to just transfer their stake either.

I agree 100% with what the previous poster said about calling something like an EGM somewhere formal (accountant's) etc to discuss the matter and having your lawyer there.

By the way - of course, it would be entirely legal for YOU to sell your shares too. Might be interesting to suggest to your parents if they insist on going through with transferring their shares to their brother (assuming they can) you would look for a buyer in the business yourselves. If they couldn't impose some sort of non-compete.

Just giving Op a slightly different perspective!

OP- If I were you, I'd get this thread taken down in case it turns up in the Fail.

@greenbelt - her situation is not remotely comparable to yours.

Badbadbunny one parent outlives at least one of their children very frequently. Inheriting half a million at age 70+ would also be of little use now... She'll only inherit anything when both parents die, and unlike most European countries there's nothing in UK law stopping her parents leaving everything to her brother, or his children.

So they bought 50% of the company for £10k and you have paid them back the 10K? Surely that means that you have just gifted them 50% of your company for nothing? And now they plan to give it to your brother.

I know hindsight is a wonderful thing, but really you should have bought the shares back off them rather than just paying them back the money. They didn't lend you the money. They bought something and now you've paid for it for them.

Frankly, I think I'd rather pay more tax than let them have a penny more dividends. Good luck with finding a more permanent resolution, you'll definitely need legal and financial advice on how best to disentangle yourself.

Hey op I have a brother like yours and while I don’t have a company so cannot offer advice on that I just wanted to say that when I moved out I really learned that we cannot choose how those we love love us just how we love them and that if people we love do not treat us as we need to be treated then its okay to distance ourselves from them. I always felt worthless but I am v proud to here how far you have come xxx

I never said it was - I’ve just posted my own situation - It makes no difference to me what op decides to do - but her actions could lead to untold emotional strain from a family perspective - even more than there already is - if she’s not bothered about this go ahead and just ignore my posts - but sometimes things don’t always go to plan and a death of a parent could trigger off all sorts

I just don't understand how the original agreement even happened like this.

They lend you the money, and you pay it back from your wages. That's a personal loan, not a business loan or an investment in the business. But you still gave them 50% of the business and continue to pay them dividends.

Was it a personal loan, paid back from your own money or was it a business loan which should have been paid back from the business? Or was it an investment in exchange for shares and dividend?

They got the best of all worlds, and you agreed to it. I just don't understand.

but her actions could lead to untold emotional strain from a family perspective

Her parents have been incredibly shitty to her. She doesn't need to hear ANYTHING that might make her feel guilty about looking after herself - emotionally and financially.

OP - also there are solicitors out there who specialise in family business disputes who have seen it all and will probably have thoughts. THey won't be cheap but it's probably worth it.

Surely if they no longer want the shares and insist of giving them to your brother the fairest gift would be half their share to you and half to your brother - this at least would give you 75% and control of the company.

The £10k bought their shares. There was no need to repay it.

The company will not be worth £20k now I assume so you need to pay them for the market value of their share unfortunately.

Definitely legal advice. Depending where you are based I may be able to recommend a solicitor

Don't worry about inheritance, there's every chance you'd get screwed over in favour of your brother no matter what you do.

Your parents have taken you for a ride.

They sound petty and sly. This isn't normal behaviour. Mine are very generous and kind in comparison and would never have expected repayment of 10k let alone accept dividends. From their own child's hard work. Wow.

Play dirty!!
Do what you have to do to take control of your company, that you've worked so hard for. If that's dissolving it and reopening under a new name, so be it.

im not out to make the OP feel guilty about her decisions - exactly the opposite - and the untold emotional strain could be on her -

Given they have 50% equal shares and nobody seems to have thought about even the most basic legal protections here, unless I’m wrong about that, I don’t think there is anything you can do here - you need to make a deal to buy them out and tell them unless they take the money, you will not do a stitch more work for that company for their or your brother’s benefit. You will perhaps need to offer a bit more to get them out as a clean break? Make sure all offers are written and documented. You need legal advice on the content of that agreement so you can be sure they renounce any further claim on you.
If they won’t you need to think practically if they might realistically pursue you legally because starting afresh may be the only thing you can do. The expense and pain of it may just put them off.
It is much harder if your business owns significant assets. I’m hoping for you it’s just your talent and your team and you can make a clean break.
I wish you very best of luck OP.

Did you get any advice today?

I hope you get this sorted soon OP

Op are you any further forward with things?

Sounds so awful OP! Hope it ends well for you

“I don’t think there is anything you can do here - you need to make a deal to buy them out“

Not sure about that. I suspect there’s lots the OP can do with decent legal advice. She describes it as a “consultancy”, which to me reads as being more about selling her services than assets in the company. In that case, and assuming she hasn’t written restrictive covenants into her own employment contract (unlikely), a new company would seem the way forward.

As I posted above - there is some very inaccurate advice here...
at 50% shareholding you are basically stuffed...
you have a legal obligation as director to the shareholders
you can not make certain decisions without the other shareholders...
you can not therefore just run down the company - nor do you have a right to pay as salaries / not dividends etc - the other shareholders have the right to hold a board meeting and have equal say to you on pay levels / dividends / etc. - it will of course be stalemate - but if you arbitrarily make decisions and then your parents decide to pursue you there is a world of pain over the horizon

get legal advice before you do anything else

I would agree with all of the "get legal advice points", but would think that surely being the key employee gives you certain rights: as a PP said, as Director you have responsibility to all shareholders, but as an Employee I should expect you have every right to quit. That right should give you leverage in a negotiated solution, or another way out if that's infeasible.

Where it may get tricky is if you quit in order to start another competing firm - hence the need for legal advice to make sure you do that in an appropriate way. In this situation, there is clearly no moral imperative to do anything other than just that - you just need to watch your legal backside.

the problem is that the OP is not just an employee - but also director with responsibility to the shareholders - if the OP quits, that might be fine as employee - but not as director - it all gets very complicated... it is one reason why when we advise our clients the answer is never never have a 50/50 split...

as the OP has the 50/50 split they need to take legal advice - or bluff their parents

Did you seek legal advice OP ?

How did you get on @Bubs101 ?