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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

To stick to terms of agreement with friends

265 replies

Bungybungy · 14/03/2024 10:05

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.

OP posts:
Scarletttulips · 15/03/2024 14:24

I’m sure you also have principles OP a deal is a deal, you took a risk - it’s paid off. That’s business.

RoberttPostesChild · 15/03/2024 14:43

@Bungybungy Amazing!

Have you received any dividends or does she pay herself a huge salary/bonuses + benefits so no dividends?

Mostlyoblivious · 15/03/2024 14:46

I don’t know about legalities but can she be cautioned in the letter against resorting to the threatened libel / defamation threats?

Morally, she is completely bereft and you absolutely should get your 20% company worth, and I would hope costs of she blows this up

LenaLamont · 15/03/2024 14:49

Good for you, @Bungybungy

Bungybungy · 15/03/2024 14:51

RoberttPostesChild · 15/03/2024 14:43

@Bungybungy Amazing!

Have you received any dividends or does she pay herself a huge salary/bonuses + benefits so no dividends?

Edited

Dividends were ploughed back into the business until last year where we took them. I got about 20k

OP posts:
OhYeahOhYeah · 15/03/2024 14:52

Bungybungy · 14/03/2024 10:22

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

Assuming the contract drawn up, detailed your ownership as a percentage rather than a figure, then peruse the contractual agreement

She cannot dispute those terms

What an unpleasant situation to find oneself in. Hope you come to settle suitably

donquixotedelamancha · 15/03/2024 14:57

Picklestop · 14/03/2024 10:16

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?

You invest almost all the capital in a business, work for it as (effectively) a non executive director for two years and you would give most of the value of your shares to someone who has behaved poorly?

Its fine to be a pushover but its not nice to encourage others to be mugs.

OhYeahOhYeah · 15/03/2024 15:12

Lazypeopledrivemecrazy · 14/03/2024 19:56

I'm afraid in your shoes OP, I'd be digging my heels in and saying, 'no, sorry, I don't want to sell at this time', then if you've got the money, you could always really wind her up by offering to buy her out!!

Seriously though, why not hang on to your shares, if you think the business is going to continue to make money and increase in value, then I'd hang on in there. She is really trying to shaft you, which is very unfair, when you were good enough to show faith in her abilities by actually investing hard cash to back her, so she deserves to suffer after trying to rip you off.

Makes you wonder if there is a big ‘deal’ on the table which she wants to fully capitalise on, without sharing the revenue……..

OhYeahOhYeah · 15/03/2024 15:18

Stuckinthemiddle7890 · 14/03/2024 20:06

Make a counter offer to find a way to resolve the matter. Sounds like you have experience in these issues so you'll know how to respond. In regards to outing your business, ignore but bear in mind threats like this. Don't pander to her. Only you know how you run your business and I'm sure there's no genuine issue she's talking about, probably clutching at straws. Don't engage in conversations she can later then use about this topic. In the event she does make inappropriate comments you can counter with the relevant response depending on whsts been said.

Legal action could be possible against her threats too. Abhorrent behaviour on their part eh!

Thisilldo · 15/03/2024 15:31

Do not roll over

Igmum · 15/03/2024 15:45

No advice, just so pleased you're standing up to this CF and good luck. Think you might be in for some carnage at the school gates, but you're definitely doing the right thing.

HappiestSleeping · 15/03/2024 15:50

@Bungybungy I am awaiting the result of your 5pm letter with baited breath. Please report back here as soon as you get a response.

We are all living this vicariously through you.

RoberttPostesChild · 15/03/2024 16:02
Disappointed Schitts Creek GIF by CBC

You've been fair, I don't know what she expects. You shared the risks now it's time to share the rewards.
How pathetic of her to sour your common achievement in this way. It can only get worse now.

pavedwithgoodintentions · 15/03/2024 16:12

Bungybungy · 14/03/2024 19:52

She asked F how much she thought the business was worth now but F said that wasn’t important but it’s the principle that matters more.

Why yes, the principle does matter more. And here the principle is that she needs to abide by the terms of the contract. She'd have been happy to 'enforce' the loss of your entire investment if the business had gone 'tit's up', no doubt, and you would have had no recourse. Just because the situation is the other way round, successful business, your investment paid off and needs to be paid out, doesn't mean she can demand otherwise.

She's a right entitled CF.

ButterBastardBeans · 15/03/2024 16:25

Codlingmoths · 15/03/2024 12:13

I work in investments, seed capital for new businesses is a killer, she could have flogged herself for years and never got going. I’d issue the request for buyout per the contract via solicitor and possibly see a pr person about preparing a statement for social media. Something along the lines of:
Some years ago I invested in a friends business, she didn’t have other ready sources of capital and needed some to start a business, any founders know searching for seed capital is hard graft and she didn’t have to go the rounds of vc firms because of me. Like most providers of seed capital we drew up a contract. It is to my great shock and disappointment that I find that despite the clear nature of the investment and contract that she regards the money as a gift not an investment and plans to return only what I put in. My lawyers will be handling the buyout process so it is legal and fair. I have learnt a great lesson about money and friends.

I think is brilliantly clever on a lot of levels.

If she moves against you it will be revealed that it's her so it's like a silent and free gagging order.

Vod · 15/03/2024 16:29

OhYeahOhYeah · 15/03/2024 15:12

Makes you wonder if there is a big ‘deal’ on the table which she wants to fully capitalise on, without sharing the revenue……..

I thought that!

Bungybungy · 15/03/2024 16:40

ButterBastardBeans · 15/03/2024 16:25

I think is brilliantly clever on a lot of levels.

If she moves against you it will be revealed that it's her so it's like a silent and free gagging order.

It is brilliant I agree. I may have to borrow it.

OP posts:
pavedwithgoodintentions · 15/03/2024 16:51

Highly recommend you issue a statement as suggested above after talking to your own lawyer(s).

Noshowlomo · 15/03/2024 17:04

Oooo it’s just gone 5

Winter2020 · 15/03/2024 17:16

Hi OP,
If you are communicating informally with your friend ask her if she has ever seen Dragon's Den. If not recommend that she watches a few episodes. Perhaps your mutual friend could recommend it to demonstrate how investment in businesses work. It is literally what every person on the show asks for - cash for a share of their business - frequently a reduction in the % owned for getting the investors cash back to them within a year or 18 months. How could anyone not know an investor wants to make money and own a % of the business?

If you are getting a solicitors letter I think it would be worth saying that slander will be dealt with via the legal process i.e. suing her - in the legal speak recommended by your solicitor.

You could say that as your relationship appears to have broken down perhaps it is for the best that she buys you out - but that will have to be at a fair market rate after a business valuation. You could always hint you could sell your share to someone else - someone else might not be as agreeable as you.

IReallyStillCantBeBothered · 15/03/2024 17:26

Picklestop · 14/03/2024 10:16

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?

I’m sorry but that’s not it works, OP has a share of the business and if she wants to buy her out the business needs to valued by a third party company. If OP wants to give her a discount that’s fine and at her discretion but she doesn’t have to.

Would her friend have agreed to share OPs loss if the company failed? You don’t get to change the terms of the agreement after the company succeeds.

This is why business with friends is a bad idea and I’m glad OP has a legal coTracy not a handshake agreement.

Bungybungy · 15/03/2024 17:26

Noshowlomo · 15/03/2024 17:04

Oooo it’s just gone 5

I’ve not heard anything but her daughter has just dropped my daughter from all forms of social media, so I’m assuming she’s seen the email.

OP posts:
Thementalloadisreal · 15/03/2024 17:33

Bungybungy · 15/03/2024 17:26

I’ve not heard anything but her daughter has just dropped my daughter from all forms of social media, so I’m assuming she’s seen the email.

It’s so sad for the kids that this toxic woman’s behaviour is going to affect their friendship

Thementalloadisreal · 15/03/2024 17:33

To add, I think you’re doing the right thing and she is selfish and crazy.

Scarletttulips · 15/03/2024 17:36

I doubt your daughter will be missing her at all. Generally you find kids are a bit more astute in friendships than adults.