Help money issue

[minimalist99]

5 years ago my sister started an online business that sold handbags with a friend from UAE. My sister invested £2k and her friend invested £3k, a year later her friend told her that she no longer wanted to be involved in that business. My sister said ok and her friend said I want my money back and literally disappeared and only responded to messages sporadically. Last year she sent my sister a message saying I no longer want the money, my sister is not working and is a stay at home mum with 2 year old twins. Few days ago this so called friend calls asking for her money back even though she said that she didn't want it last year.

Where does my sister stand legally? Baring in mind this person lives in the UAE and she knows my sister's home address. There is no legal contract that was in put in place.

Bump please reply

Was the business based in England or UAE? Was it a limited company or a partnership? Did they have any written contract between them about how they would run the business.

What do the account show about the money that was put in - eg does it show it as share capital or a loan owed back to the director who put it in? If a loan did they have a written loan agreement?

The business was based in the UK, my sister made a business account using her residential address as all the items were delivered to customers from the UK. Initially her friend had transferred the money into her personal account. The business account was only made as my sister thought there was a future in the business but unfortunately it ended on a sour note. There were no written agreements and the business was a partnership but it wasn't registered or anything. It was solely a venture in primary starting up phase hence why it wasn't registered with the HMRC. Her friend is a resident (emirati) of the UAE.

I think she'll find it really difficult to enforce a debt on an emirati citizen, especially if she has no written evidence of it.

What happened to the business account after your sister stopped running the business? Was there any money left?

There were stock assets of £100 that is all.

So in English law (If that applies rather than UAE) that would be a partnership with no written agreement and governed by the Partnership Act 1890 (yes that one is still going strong).

If they sold products it is not in starting up phase and your sister should have told HMRC she was trading in partnership and will be liable for tax on any profits made which is a separate issue but if HMRC come after the tax your sister probably wants to make sure she doesn't have to pay 100% of it rather than half.

So the partner put in £3000. Did trhe partnership make losses? There may be nothing left of each side's investment after they paid costs? if so they both lose out. If instead the cash is still there it is a partnership asset owned by them both presumably 50% each but it sounds like they dissolved the partnership, In that case the 1890 requires the assets to be divided. however the point here is the sister says the friend agreed to waive any claims to her £3k back, presumably also to any profits made and to any share of any other partnership assets. She should see if she has any emails from the time which can prove her side of the story or saved text messages.

The main question we are being asked is can you change your mind later - can you waive a sum owed to you and then later ask for the money? If they had signed a document saying she gave up her rights ideally signed as a deed we would be more confident advising it was now too late. It will be hard to prove either way but not hard to prove the £3k was handed over. Another issue if English law applies is some debts after 6 years cannot be recovered so possibly as time goes by it will be harder to collect under the Limitation Act 1980.

Finally if the friend UAE gets a court decision there your sister may find she cannot travel to that part of the world again without being jailed. It is a very serious matter if you don't pay a debt out there - you can go to jail for decades so just be careful about that is happening out there., not that avoiding Dubai is any hardship.

My sister has message on Twitter saying it's ok I dont want the money.

Bump

Xenia's advice is comprehensive. OP what further information do you need?

She may well still owe the money. I would look at what costs the partnership incurred and do a written list of costs and expenses of the business. If that shows at the end of the day £3000 left then the starting point is it's divided between the two, if they agreed 50/50. You don't in England need a written contract to form a partnership. I don't use twitter but I thought it was public so very unlikely someone would put a message to a business partner on there surely but I might be wrong.

If your sister is in the uK and never plans to go to UAE again she could just do nothing and see what happens or she could just get a written agreement settling everything including partnership debts as well as assets - just a one pager they both sign saying they agree formally to stop their partnership, that both sides will pay half of any tax due, that there are no assets left other than cash and that if there is cash each party can keep what they have including your sister keep the £3k. Both sign and that gives them certainty (and do check if any tax is owed to HMRC for sales made of products).

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If English law applies, promissory estoppel may help here.