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.

Go and see your Accountant first. Bear in mind that regardless of any Directorship responsibilities no-one can force you to work for anyone or any company (the only thing which would impact would be an anti-competition clause and even then as you are the only business generator if one exists it is unlikely to be enforceable). Even client / company contracts can be got around by subcontracting. The Legal ties are what they are but they become much less binding if there is no money or income generator left.

Just to say this is not uncommon even without business / loan entanglements with DPs. I no longer subsidise my DM as she gives any spare money she has to my DB. I wouldn't actually mind this except he then uses it to fund his self-abusive lifestyle.

If you can't stop them, I'd be telling them you are resigning and selling your shares and starting another limited company instead.

Offer to sell them your shares so your DB can own the company outright.

i Agree with everyone else, don’t say anything to family, get legal advice, wind business up if necessary.

I also think you should get some therapy while this going on, talk to a third party that help you navigate this emotionally

Agree with FrangipaniBlue and Litchie speak to your accountant.

Winding up a solvent 50/50 would be difficult without the consent of the other shareholders, but there is nothing to stop you setting up a new company as mentioned by PP.

In the meantime, you can increase your salary to a sustainable level and do not take down any dividends. Leave it in the company. Look at paying yourself bonuses. Yes you will take a hit tax wise but it will be worth it not to have to release money to your parents.

But above all see your accountant

I don’t actually think there’s been too much bad advice - most people have said get legal advice, but if your solicitor is decent and honourable they’d say ‘We need to involve an accountant’ and the end result would be the same, essentially, speak to someone qualified.

People have listed a whole load of possibilities, some good, some probably bollocks. In my humble experience it’s good to go to advisors with a bunch of questions ‘well what if I did this’. Generally advisors want to advise, not instruct, so the basic idea / business direction should come from the client.

Also remember if you turn up to at the office of a professional and say ‘I want to strip a 50% shareholder out of the business’ their instinctive reaction will be to treat the whole situation with caution. Consider the story you go to them with and try and pitch it in as reasonable terms as possible. Definitely consider what it is you want - starting a new company on your own on your own terms (and letting the old one crumble without you) seems the most straightforward to me, but only you know what the best outcome would be.

And I’m not sure what your point about tax is - if your parents are getting 50% dividends they are essentially laying a 50% ‘parent tax’ on your profits on top of the corporation tax you pay.

Surely in those circumstances increased salary would still leave you with more cash in hand - albeit with a higher ‘government tax’ bill.

Your accountant will give you some strategies. My interim advice is to set up another company with just you as a director / a sole trader account, and start contacting your clients to ask them to process the change.

If you had gone and used your education for a highly paid job working for someone else would they have expected 50% of your salary to go to your brother so that it's 'fair'.

I think that you need to give them this example to give some logic to the madness of the situation.

Dear god, you think you've read it all about crappy parents and then you read this. I have nothing to offer other than I have two family members who are CAs and they'd advise you to see your account as soon as is possible.

Good luck with the rest of your life free from money grabbing parents.

I’m a corporate lawyer. You definitely need specific legal advice - an accountant can help with the tax implications of the various options but in my opinion you should speak to a solicitor and not just rely on an accountant for legal advice here.
There are various options depending on the provisions of your Articles and Shareholders’ Agreement (if you have one). It’s not as simple as just shutting the company and starting a new one.

I just checked, the company is only worth the assets...
So don't buy a thing new...
Just lease things... New car ect.
Also as I said put in writing that you want a pay rise, this is an accountant thing, not solicitors.
You should make sure there is no money left as profit each year...

Wow, what a situation to find yourself in, OP. Congrats on building up such a successful business, and I agree that I would be livid if I was being forced to share that with a lazy, abusive family member.

I hope you seek advice from an accountant, and don't let your family's emotional blackmail get in the way. You're not the one hurting the family, they are.

I hope it works out OP, your parents sound like freeloading wankers..

Lawyers and accountants do different jobs, in a situation like this both roles need fulfilling.
My instinct is that whilst your parents are happy to keep the peace with your brother, they wont be so happy to do so with you as they know he is less compliant than you are, and let's face it if it has got this far you are fairly compliant.
The sh*t will hit the fan.
Get professional pragmatic advice and then follow it, but brace yourself for the fallout.

The more I think about it, to more it’s madness that you’ve paid your parents dividends whilst not paying the loan off. You should have taken the money as bonus, let the tax man have his share, and paid your parents loan off. Not simpkybhabded them diveidends.

The tax situation just means that you’ve effectively had a ‘parent loan’ tax on your earnings from the company rather than give it to hmrc. If they have had £100k in divendends from a £10k loan, they’ve done phenomenally well from your hard work.

Juells the significance is that the ownership of the company is documented. The actual situation is there in black and white.

@TBDO, OP states that loan from parents was paid off three years after business start-up.

I would also dissolve and the restart under another name.

Speak to a solicitor. You may be able to compulsorily but back the shares or veto the transfer (many private companies have a process whereby they have to approve of any share transfers). Do you have any documentation that may help? Initial investment agreement? share certificates? Contracts of any kinds? What does your company’s memorandum looks like? Good quality legal advice is key here. If it comes to suing you have options beyond the courts such as mediation (which may be suitable if you want to attempt to preserve family relations) or arbitration (which is usually faster than the courts if you want it over and done with).

No advice except 'see an accountant'.. just invested in this now and wanna know how it turns out. Thats some epic, top level CF from your parents!!

Also over-invested!

I read a lot of this thread this morning but I can't remember seeing it posted but I've just been chatting with DH who is more clued up on limited businesses than me and it would appear your parents can't just gift the shares to your brother.

If a limited company is turning a profit the shares can not be given away, they have to be sold at market value so your brother would have to buy them which, it would appear, he cannot do. So you probably have more power here OP than you think.

But again, get some proper advice and good luck. I agree with everyone else, I'd go it alone to save having to pay your parents anymore dividends from your business!

They took advantage of you by taking 50% of your business, especially as you were young so they have no right to talk about families looking out for each other.

Seek legal advice about dissolving the company etc and/or speak to your accountant about minimising dividends.

So sorry to hear that your success is causing you problems. It shouldn't be like that

Move your salary to Paye and just don’t declare any dividends.

Would also get advice from HMRC as there would be tax implications for them if deemed to be giving away below market rate.

Get legal advice it’s a complicated area we are just trying to do a company buy back of shares.