If you own 75% of a company....

[Ohmygodeverynameisfuckinginuse]

So I started a company with my then close friend. I own 75% she owns the rest.
She does absolutely nothing. And I mean nothing at all. But every year I have to give her 25% of the profits. I no longer want to do this. It’s not fair.
Where do I stand legally? Or do I just have to close the company and start again?
Can I make her sell her share back to me?

I think you are best taking proper legal advice. Will she not sell her 25%? If you are doing all the work, I would have a word and say that they need to pull their thumb out..

What was the original agreement with her having a 25% share??

Did she put in 25% of the start-up costs? She's not actually required to do something in order to be a shareholder, it can just be a financial stake.

Is she a director of the company?

No start up costs. Yes both directors. No contract and no value on shares. Just on companies house the share 75 to 25. She won’t sell them back to me. She gets money for doing nothing.
Last time I spoke to her about pulling her weight and the shares etc she laughed and said tough shit. Why should she bother working when I’ll just do it all.
She won’t do anything to help out so I’m stuck paying her. I wish I had never involved her at all. I was hoping she would make something of herself. But no I have just given her a way to be even more lazy.

Deduct a salary equivalent to most of the profits?

You need some financial advice - whilst it could be advantageous tax wise to take dividends are you taking a salary and making sure your expenses relating to your activities in relation to your work for the company are being met by the company? This would minimise profits and dividends. You also don’t have to pay a dividend - if you are happy with any salary you take you can simply choose not to pay a dividend one (or five!) years....

You have 75% of the shares, you therefore have both control and the ability to rewrite the company articles if necessary. What about creating a new class of share which you sell only to you, so you then have two different classes of shares to put the dividends through? Then you dividend nothing to your original class of ordinary shares and everything to the new class?

I dunno if there are snags I've not thought of in this though, so it would be a speak to a solicitor/accountant job.

Just place marking as I am very interested in this.

Worst case scenario, if you did close the company and reopen, how would they affect you?

I would really take some proper legal or financial advice on this as seems she is taking you for a ride.

You should be deducting yourself a salary for it to compensate the time you are putting in.

Let us know how you get on

So I can pay myself all of the profits? Is she entitled to look through my books for example and question anything? Yes I think I need to see a solicitor. Enough is enough.

RainDancer and CrazyHair offer wise advice. Shareholders carry the financial risk of the company and in return receive a share of the profits and a say in its governance. Its staff do the work that generates the profits, and are rewarded with a salary. It’s perfectly acceptable to be both (like you), but it’s a different relationship to merely being a shareholder (like your ‘partner’). A decent solicitor can advise you how to restructure, or formalise your current custom and practice. Walking away could be complicated - ‘goodwill’, including the value of your current customer relationships, is part of the company's value.

You need legal advice. A salary is likely to be something to explore though. Its completely different to dividends.

Oh OP I've been in a similar position. In the end I filled out some forms giving my shares to the other person, resigned my directorship and started again.

Get some legal advice though to be honest I got better (free) advice from my accountant than my (expensive) solicitor.

I'd speak to your accountant in the first instance rather than a solicitor.

Go to your accountant they will be the expert you need here
Put everything in writing this time

Agree that you need proper legal advice.

Unless there is a shareholder's agreement it is unlikely you can force your friend to sell her shares. She may, of course, be willing to sell if the price is right.

You are currently paying all the profits to the shareholders as dividends. You may be able to employ yourself and have the company pay you a salary (or increase your salary if you are already receiving one), reducing the profits. You may also be able to pay only a small proportion of the profits as dividends. However, that may be less tax efficient.

There may also be other options. But you need proper legal advice and possibly also advice from an accountant to figure out what approaches are available and which will work best for you.

You should wind up this company and start another but yes definitely take advice

I agree (as usual) with prh47bridge. As 75% shareholder you control the board of directors. You can remove the other shareholder from the board if you want, or vote yourself the going rate for the job you're doing, or both.

What kind of business is it? Does it own any assets? If it's something that is reliant on your personal reputation you could just dissolve the company, but FGS pay yourself the going rate with immediate effect. And check who has control of the bank.