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 can resign as a director now if you want. No one can force you to stay doing it. That would be the easiest way to start severing ties with them. As a director you do have a duty to act in the best interest of the members/shareholders, so the simple solution is not to be a director.

Don’t forget to cut all your financial ties if you resign. Pay back any director’s loan you owe to the company, and take yourself off the payroll if applicable and give yourself a P45 etc. If you are owed money by the company you should only repay yourself if the company is solvent and the transaction would not make the company insolvent.

Then sign your shares over to your parents and let them get on with it. Give them the details of the accountant etc and it’s up to them to appoint someone else as a director and organise ongoing trade.

I’d dissolve and and start again afresh. They may have had good intentions initially but what they are suggesting now is so manipulative and so unfair! Theyll just say they are trying to be good parents so wouldn’t bother reasoning. Had a similar situation in my family with a house loan and dad barely spoke to me for two years after refusing to lend him ALL the money from my subsequent house sale! Families are flipping mental sometimes.

Get legal advise.
Good luck!

If it was me, while I was waiting to see the solicitor and accountant I'd set up a different company.

And start with any new clients under the new business. That way, no matter what happens, you've got a safety net of your own income and a new business.

As with Frang above I am a CA. This is a surprisingly common problem, but not one that I would give advice on without all of the facts.

OP, you sound like you have a reasonably successful business therefore I assume you have an accountant, if not get one. There is lots of advice on this thread, some of it is good, but a lot of it is complete nonsense.

Frang mentioned it above, your have probably told the most tax efficient way of taking money from the company is an £8k salary and the rest in dividends, this is true in some cases but in yours you up your salary to a significant sum and pay any excess profits as a bonus.

Sounds as if you've had some useful advice OP. One further thought following FrangipaniBlue s advice.
I have run two businesses, a limited company and one as sole trader (two different fields) running alongside each other. If getting your parents / brother out of this seems too difficult might it be possible for you to set up a sole trader business in addition and put a lot of your business through that. Obviously with the correct legal and accountancy advice. Just another thought.

Take the advice of an accountant, they’ll be more knowledgeable than a solicitor at this point. I’d follow the advice of Isleepinahedgefund the company will still be active and the income will run down, set yourself up as a sole trader. Be strong and don’t be emotionally bullied.

also possible tax implications for both DF and DB but that's a whole other worm hole!!

It would be bloody funny if the DPs "gifted" their (possibly soon to be worthless, if OP finds a legal way of stopping working for the existing conmpany) shares to DB and he was liable for CGT or something on the value of the shares at the date of transfer.

That would truly be a poisoned chalice! And karma for the abusive brother.

Absolutely livid on your behalf OP!

Your parents are total arse holes. Gobsmacked!!

Get legal and accounting advice.

Tell your parents nothing.

Do this by stealth.

They have been giving your hard earned cash to your DB for years IMHO just now have confirmed it.

At the same time invest in some high quality therapy to understand your dysfunctional family and to grow and emotionally protect you going forward to see this through.

Op i agree with everyone who is saying get legal advice...

Also definitely close and reopen as a new business ( warn your clients you are closing down and reopening under a new business name so you don't lose any clients and its less disruption for you)...

Also get legal advice about the shares, if it was agreed that they can buy shares under the agreement that you buy back then they are breaking that contract with you by saying they will give them away to your brother

Have you asked your accountant for advice on this?

Start with them, then contact a lawyer if necessary.

Do you have a shareholders agreement?

HRTFT but I'd try to find a way to set up another company, let that one wither on the vine. :(

When I was younger and even more foolish than I am now I set up a company and against the advice of everyone more experienced I made another person a 50/50 partner. She loved drama and publicity, borrowed thousands from the bank to finance stands at trade fairs when we didn't have the manufacturing capacity to fill the orders, she'd hand-wave away all my concerns, "Of course I won't leave you with owing money, I know you're a single mother, what kind of person do you think I am?". Then skipped off to the US leaving me with all the debts (£32,000) :( It took me six years to clear them. I look back and wonder how I was ever so naive and trusting :(

Sorry for the rant, it touched a nerve

That's a point, standard shareholders agreement usually include a clause regarding the selling of shares. Normally that any shareholder who wants to sell must first offer them to current shareholders. Check your agreement, because they might not be allowed to sell them on if you have first agreed to buy them.

If you didn't have a written agreement but only the verbal one you mention, then it amounts to the same thing but you didn't write it down so don't know how you could enforce it.

I'm so sorry op but your parents have taken advantage of you for years. Now you know, you can seek advice from a professional accountant and look after yourself.

If you didn't have a written agreement but only the verbal one you mention, then it amounts to the same thing but you didn't write it down so don't know how you could enforce it.

As Samuel Goldwyn said... "A verbal contract isn't worth the paper it's written on".

Thank goodness someone finally gave the OP some decent advice to speak to her accountant. The amount of terrible advice on this thread just shows that lots of people don't know what they are talking about!

Juells if her parents own 50% of the shares they will be listed in the register of members of the company, noted as shareholders in annual accounts and on annual returns.

Juells if her parents own 50% of the shares they will be listed in the register of members of the company, noted as shareholders in annual accounts and on annual returns.

I don't understand the significance of what you're telling me?

Who drew up the articles of association when you set up the company? If a standard template was used and they didn't specifically amend it, it may very well state that existing shareholders must be offered shares first, as someone else has pointed out. Dig out all the documentation you have and check through it all. I think a copy has to be filed with Companies House too, so they should be able to provide you with a copy if you don't have the original? I may be wrong there though - as others have said, seek legal advice.

Fingers crossed you find that they can't do what they are proposing anyway. Many people are surprised that they can't just do whatever they fancy with companies, there are laws and rules they must comply with!

If you can't stop them, I'd be telling them you are resigning and selling your shares and starting another limited company instead. Then they are free to do whatever they wish with the company itself. If you have staff that makes this option a bit trickier, though they may be perfectly happy to just move to the new company.

Have a horrible feeling that the parents knew exactly what they were doing so any original contracts will be to ensure their control and in their favour. Even the passing of their shares is their form on control.

I get it . My parents would do anything to "keep the family together" my sister and I are not best mates and very often she is rude and intolerable but they say it's just her way My parents would pull something like this to try and get my sister and I together, ignoring the fact we just don't like each other.

Go to see a chartered accountant and get advice now.
Check whatever agreements were put in place at the time the company was set up.
Give your staff a pay rise.
Give yourself a pay rise
Pay yourself a massive bonus at the end of the year.
Nothing left for dividends unfortunately.
It may not be tax efficient but under these circumstances, I would pay the taxman with a smile on my face and a song in my heart.

I think the best way is to up your wages
Have you managed to pay back all of the loan?
If not ask them to put in writing how much you still owe.
As said you can make sure you pay yourself every penny profit.
You do not need to lose your Company.
Tell your parents that they need to see while you do not mind buying the shares back it is unfair to you what they are doing, and legally you will fight them on this, if they value family so much why do they want to cause a split, where you will never talk to your brother again...