To stick to terms of agreement with friends

[Bungybungy]

Burner account. I’ve been friends with F for decades. She had a large social media presence. I’ve worked hard to establish my business and have been successful. I’m proud of what I’ve achieved. 5 years ago, F came to me with a business idea, wanting to set up herself. She didn’t at that time have the funds to set up by herself so I agreed to invest a not insignificant sum in return for 20% of the business. She was happy with that deal, and because I work in legal services, I got our guy who deals with contracts to draw up an agreement specifying what rights and responsibilities etc. Although this was an area she had worked in before, she had never actually run a business before. I guess that’s why she came to me in part, so it wasn’t just about the money. To her credit, and using my advice, the business has grown quickly and is well known. At the time of the investment I understood that I could just as easily have lost my money completely.

Our relationship is now very difficult as I’ve realised over the last 2 years that she’s been distancing herself from me, which is fine, relationships come and go, but last week I got a letter from her solicitor telling me that she was unhappy with my ownership and that she wanted to buy me out for just over my initial investment. Given the business is now worth several times over my initial investment, I can’t accept that (she put close to no money in herself). For her to pay me off would cost her 5 times my initial investment. AIBU to expect her to honour the agreement? I know she’s contractually bound but she’s been so vile about this, I’m second guessing myself. She keeps threatening to “out” my business via her social media(I have no idea what this means). I’m actually scared about what she could do.

No, you stick to the original terms!

If she outs you, more fool her, she will look unprofessional and ridiculous.

That’s the whole point of investing in a business or start up, so you potentially get the equity back out, not so they only pay you the original amount.

Just so you know, this is really quite common, people are generally dicks when it comes to money, Sadly.

I wouldn’t even entertain any discussion, everything through solicitors but straight forward. Your investment of £x was for x% of shares. That value is now worth £x amount. Pay out and sign over shares.

I don’t think I would be demanding five times my initial investment back from a friend. But a little over your initial investment is not on either. Surely there is some middle ground? How is the business being valued anyway?

But the thing is she is no longer a friend! She needs to stick to the terms of the contract and would be better off buying you out now than waiting until it's worth even more.

5 times the investment is what my share of it is approximately worth now

You invested with agreement that you owned 20% of the business. If she didn’t negotiate a buy back once your initial investment was reached then she didn’t have enough foresight/hasn’t watched enough dragons den to understand that’s something that investors will only agree to if it seems like a dead cert to be successful.

You own 20% fair and square. She can offer to buy you out now, if she no longer wants your advice it’s best she cracks on and does it now before she grows it even more.

outing you on social media is a stupid idea as she will shoot herself in the foot - you can issues cease & sexist and sue for slander if it comes to it.

You wouldn’t pay a friend what they are due?This is business investment not a round down the pub.

Absolutely stick to five times your initial investment if that is what it is worth. You may have been friends, but it was a business transaction. She has benefited from your start up money and your guidance - she probably wouldn't have a business if it wasn't for you. If she is unhappy, she doesn't have to buy you out. You took the (greater) risk initially, it's fair you should be adequately compensated in line with your original agreement.

Sounds like she thought she might have been able to wiggle out of it later but can't because of your contract, so now she is trying to intimidate you.

Engage a solicitor and deal only through them.

As PP said. Offer to sell your 20% of shares to her for current market value, or you will seek another buyer. If her business is worth what you say, she will have no issue getting lender funding for the buy-out - or she can get a replacement investor.

Get your solicitor to issue a cease and desist letter regarding her threats immediately.

Just deal legally with her and state you own 20% of the business and any buy out would be equal to 20% of todays valuation.
Regarding social media- have the solicitor send a cease and desist notice. A warning that anything put online without your consent will be met with legal action. Just bombard her with legal jargon she's obviously not that bright.

She only has the business she does because you invested.

You own 20% whether she likes it or not. SHE AGREED TO IT.

Therefore, if she wants to buy you out, she pays 20% of what the business is currently valued at. If it was 20% of a house, people wouldn't have a problem getting their heads around it.

YANBU OP, she is essentially asking you to pay for her success. The ingratitude is staggering, not to mention to unprofessionalism.

I would treat the friendship as over from now OP.

What you describe is exactly what happened to my brother and his now ex wife. He invested a not inconsiderable sum into her fledgling business (this investment was formalised via a drawn up contract). Fast forward several years and the company has taken off in a major way. Over this time he reduced his work hours to accommodate more and more child care duties as she was away from home and generally very busy building the company. Fair play to her she has done a great job and is good at what she does but sadly the relationship broke down over the same period. She thought she could just repay the initial investment (not even factoring in inflation) and walk off into the sunset. Her legal position was weak and virtually non existent and after lots of gnashing and stamping of feet she eventually accepted the situation.

Stick to your terms. You are making a mistake by calling her a friend; she isn't a friend, she is a business acquaintance who now owes you the money you invested into helping making her successful.

She is being ridiculously naive.
Let your solicitor deal with it, they have gone in with a stupid offer and they know it. And agree with other posters, a strong worded letter about the threats.

I think the problem is, due to her social media following, she is quite used to getting lots of stuff for free, I mean, ridiculous amounts of press/ad things. She’s so used to people giving her things she can’t understand why I won’t.

Put it this way, if the business had floundered and you made a loss, would she have repaid you any/all of it? No, she would have expected you to take it on the chin. She is wrong morally and legally.

You own 20% of the business.

She can buy it back, but that has a clearly defined cost. She can offer you a lesser cost, you are free to reject it.

The friendship is long gone, so stick to the business facts now. Send a reply stating you are happy for her to buy her shares, at the market rate.

Stick to the contract.
If she posts anything defamatory then you can deal with that. I would tell her that tbh. Say you have saved proof of her threats and will not hesitate to take legal action against her if she defames you in any way.

Don't allow yourself to be bullied by her.

She is not a friend and even if she was, that doesn't mean you should allow her to screw you over.

She’s no longer your friend. What is she threatening to ‘out’, if you can say? Get a c&d letter sent as you are worried. I would stick to the agreement and communicate only by email or preferably through a lawyer. Definitely no phone calls or private meetings where she can say you’ve said all sorts. Does the agreement mention who you can sell to, does she have first option?

Stick to the contract. She’s distancing herself from you and you’re a legal professional so you should be taking what is rightly yours. If she wanted to pay you less then she should have bought you out a long time ago.

Was about to say exactly the same thing! OP took a financial risk which has now paid off.

Sounds like a spoilt brat that got lucky tbh.

Business is business. You own 20% of the company.

She wouldn't be successful if it wasn't for you. Doesn't matter how great her idea was or how well she ran the business. It wouldn't be possible without your investment.

Just have your solicitor write back that you'll sell your shares for their market value.

I've always wondered though how it would work if she just started another company and started trading though that instead, it seems fraudulent but is it actually illegal?

She has first option for market value to be established on a multiple which she had previously agreed. She’s now trying to argue that she didn’t understand what she signed and that I took advantage of our friendship to get her to sign.

Don’t give in to her. You took the risk not her, she wouldn’t be quick about paying you back your investment if the business hadn’t worked. Don’t be bullied in to letting her buy you out even at the 5x the initial investment. If it would be more financially prudent to keep hold of your share in the business then do so.

She seems very immature, she wants all the benefits of running her own business with none of the risks. If she wanted full ownership she should have acted fully in her own from the beginning.