Ex is threatening to fold business

[giantnannyknickers]

Hi there I need some advice, I'm self representing in a family settlement matter. My ex and I ran a business together; he is director, we are both 50% share holders. He purchased two properties in Ireland using a 'loan' from the business and my share of the profits.

We are currently in the process of getting the business valued so we can sort out a financial settlement.

Today I got an email stating "We are getting the valuation done for nothing because as I told you I’m not going to buy you out"

I don't know what my options are, I'm scared he will fold the business and our employees will lose their jobs. I'm scared I won't get any financial settlement. He submitted substandard documents for the valuer. He has tampered with the layout of the website so that it's not as easy to navigate. He has not declared any cash sales which I knew would be the case anyways.

His girlfriend has also started referring to it as "our" business so I'm scared she will seek a legal claim in it too. Although they haven't been going out two years yet.

Just wondering if anyone else has had the same experience? And how they managed it. I'm
Not sleeping at night and I'm very stressed.

@Xenia I'm sorry to hear about your dad. My ex would like to think the business can't run without him but it can. In fact if we had a good manager in place I'm sure if would run a lot better. I've tried to sell him that option is such a way that it doesn't insult his ego.

The downside of all of this is that it could take up to or over a year to sell the business. Ex is refusing to be here for handover to a new buyer. I could offer today but my eldest is adamant she return to Ireland and I don't want to split the family up even more.

The ideal situation would be for him to buy me out, get a
Manager to run it and for ex return every quarter to check in on operations.

I spoke to him today about this option and he said no way as that would only mean I'd get more money.

That I should give him my share and no on would lose their jobs.

I would only give him your share if one at least of the properties were put in your name. However so much can be done to undermine the value of small companies that the more of rock solid cash or properties you can get the better even if you end up with in theory less than half the assets including company value. A bird in the hand etc.

In some shareholder disputes (which I do do by the way in practice) each side can offer in a sealed envelope what the other would buy the other half for and whichever is the higher then gets to buy at that price (it is really hard to value small companies). That would not work unless he were prepared to compromise. May be he would accept noe Irish property in his name and one in yours and you both put a manager in on the company and take half the revenue each. Some bigger companies couples do continue to work together inthe business - i can think of a celbrity chef and a hair dresser both of whom had a wife very involved in the business and both the spouses carried on in the business after and kept their own shares - not really your situation however. Or you could both take half the clients each and split the company into two as another possible compromise.

My concern here is as joint director you are equally responsible for the business and it's tax affairs. Is there an accountant? How has he frozen you out of the business? If its still in joint names you should still be named on the bank accounts etc. Is there an accountant for the business? As co director you have as much right to see the books and bank accounts as your ex.

Demand to see the books and bank stats, your solicitor should have advised you to do this. Once you have those hire your own accountant to go through them. He can't stop you doing that, and if he does contact HMRC for advice. You should also contact the banks to ask for duplicate statements.

It's 50% yours. If he has purchased property using funds from the business and they are registered in his name not the business then he needs to have either paid it as a dividend or wage and declared it as such. Or he is committing fraud. Assuming that the company is a limited company. Which I hope it is. If it's a partnership you need to be checking no debt has accumulated as it could potentially be passed back to you.

Start with finding out who the accountant is. If there isn't one, hire one. You can pay for the accountant from the business as it is a business expense.

If he won't allow that, contact HMRC and ask their advice.

The OP has not said she is a joint director. She holds 50% of the shares but she says her ex is the director, implying she is not.

@Frouby alas I'm not a 50% director just 50% shareholder, so I'm not liable for all the taxes (although he maintains I am) I'm greatful I'm not a director as he isn't very organised or business savvy.

I've asked the accountants for end of year financials and they refused to even acknowledge my emails. Although they have just recently provided this to the business valuer. My ex took a wage of 200k last year and the company had a profit of 87k: this is while I was receiving help from local charities to get by. I'm hoping there is some value in it.

He has submitted bank details for the courts and I can see multiple lumps sums of 8k and 6k etc etc to his partner. She is sham sub contracting. He has also stopped drawing a wage recently which means he must be living off cash payments.

He purchased the properties using both our share of the profits and with a loan from the business. Instead of paying back the loan & tax he has spent close to 100k on lawyers fighting me in court.

Given my reduced earning capacity and the impact having children has had on my pension contributions as I've been "out of work"

It's all a horrid mess.

Sorry, my fault I misread your op. What a mess for you, he sounds a bloody crook.

As 50% shareholder surely you have rights though? Can you not hire your own forensic accountant or report the company for irregular trading? I would be tempted to speak to an accountant firm rather than solicitors.

I hope you get whats fair, though I suspect there won't be much left by the time he and his girlfriend are done with it.

@Xenia is my ex knew what the word compromise meant then we wouldn't be in this mess

And yes bird in the hand is a good point, I was offered a settlement a few months back but progressed with the business valuation as I felt I couldn't accept an offer without knowing the full value of the property pool. Hindsight is a great thing and I probably should have taken one house and have left him have the other house and business. Sometimes the stress isn't worth it.

See what his last offer and yours to him were and have a think about roughly what the business and properties are worth and may be make him another offer.

Frouby I tihnk accountants were instructed which may be why the fees her father paid got to £30k. That is one of the hardest issues - with shareholder disputes the work can be just as much whether the company is £20m or worth much less but the legal and accountancy fees then become disproportionate so some kind of rough settlement may be more appropriate.

Did he take out £200k under PAYE as salary? Sounds like it as he wants to make sure there is little left to share with you by way of dividend. That is why even with family members it is better to have a writte shareholders' agreement - a contract - which says no large salaries unless both agree etc etc. No point in my telling you that now though and I assume there were no such agreement. So then the question is has he taken out more than he should as some kind of unfair prejudice or fraud on the other shareholder - not necessarily as he might well have done £200k of work but I can see the picture and now he's paying the new lover just to make it look like the company is not profitable. If the company had or has about £300k net profit it may be worth about £300k to £600k but I don't know if anyone buys small companies of that kind and that is just a wild guess based on his salary and the profit left over. As he can probably manipulate it now so it looks a lot less profitable any deal which gets you one of the Irish properties unless they are only worth very little might be better..

i compromjisd a lot in our divorce and my husband got about 60% of our assets even though we both work full time and we got it done in 7 months. I was paying both side's lawyers so that certainly concentrated my mind on it and also for me it was worth getting it done sooner and for a clean break so I could just get on with things. It is not easy however and disputes between shareholders are very hard and also take a lot of time which is why accountants' and solicitors' charges for them can be quite high.

@Xenia thanks for your reply. We got a quote today for 10k to get the business valued and 15k for a valuation on the tax implications if he sells the business and leaves the country with us in May.

He is going to sleep on things tonight and I hope to god he comes up with an offer so we can but put this behind us.

His original offer was made back in December. I had a very
limited time and no one to properly consult (I've no legal representation nor can I afford it) on if I should have accepted it without knowing the value of the business. He's refused to get the business valued with the best part of a year, this is the second court order to do so. Which made me feel like he's something major to hide.

In hindsight given the stress, I would have taken his original offer and just left. I just have always felt that he's short changing me. (Partly because he has already) but now I realise a fresh start is priceless.

I tried to explain to him the other day it's in his best interest to keep the business running to get a really good manager in but he won't listen to reason. There is no way he will earn that income in Ireland so it would benefit him long term to do that and no one would lose their jobs. He would also make back the money he used to buy the houses. I shouldn't pity him but I do. He's a toxic mess.

And your right accountants and solicitatiors only want their pounds of flesh.

@giantnannyknickers - you have my biggest sympathies - sounds like you are living my nightmare too - similar situation 50% shareholder not a director - very early on my solicitor suggested I keep house in exchange for company - And some pension split - my x claimed company going down the pan - stalled on company valuation and in meantime manipulated sale of home - which was forced in court - stopped paying me dividends ran up £102k directors loan - which judge took out of equity so he could clear even though just a paper transaction needed - judge ordered I hand my shares over - no value!

Add to this solicitor and barrister who fleeced me and I’ve just been speaking to my Gp about my Mental Health long term depression currently being monitored as safety risk - my solicitors didn’t believe me when I told them what x would do out of spite! I’m having to make decisions that have significant impact on kids -

My advice to you fuck valuation of the company - don’t pay out to solicitors - it’s a gamble - take what you have and get the hell out - smother your kids in love and show them that money is a poison. There is no price to MH - I am in too deep to give up - but the abuse - even the legal ombudsman ignored my request to stop reviewing my case and now the only way to challenge Is back through the courts - over my dead body and it may get to this!

The is issue is not that the solicitors and accountants spend too long on it it is just the amount of hours to do these things properly is so much that it tends to be bigger businesses with loads of money at stake that it is worth incurreng the costs.

So £10k might be money well spent if £10m is at stake but if it is a business with only £200k salary to the husband and £80k taxable profit that is not vast so it becomes hard to spend only a proportionate amount on it and still do the best job.

None of us have seen all the facts but it certainly looks like a new offer whereby you get at leat one of the Irish properties transferred into your name if you roughly know what they are worth and it's a reasnable amount.
I am a lawyer. I left with 40% of the assets and no child support from my ex, which was a price worth paying for me for the massive benefit of having it over with - that is something of huge value that I do not think is always factored in, Being able to say it's done and gain the 2 or 3 years some people have to spend in litigation is worth a vast amount. However for others they might never forgive themselves for not going after more so it is very difficult. I have certainly never regretted compromising for less than I might have got - my lawyer thought I might have got up to 60% not 40% of assets.

@greenberet I'm so sorry you're going through the same thing.

Get a good Counsellor to help you through it. I'm lucky I've a really great psychologist (who worked with DM victims and she really gets that this is financial abuse)

I'm going to ring him later and suggest he make an offer rather than continue with the valuation and hope he goes with that. Trail is in a month and I really can't handle a 3 day hearing.

@Xenia yes that's it, the business might have a negative value too! As he has a directors loan.

I guess hindsight is a great thing; when the original offer was made, I didn't have court approval to relocate back to Ireland. So I was scared if I accepted that offer I'd be stuck here without support with reduced earning potential and it enough assets to get the kids and I restarted.

I took a gamble and really regret it now. He's so full of anger and spite I'm not sure talking to him about settling will work anymore. He is gunning for trial.

It sounds like you did the right thing for you and the kids. I'm glad you're in a happier place now and it's nice to hear someone has come out of it the other side.

Send a letter recorded delivery to the accountants asking for your share of the profits in the business to be repaid to you immediately.

Presumably that is the dividend that should have been paid to you already, but was retained in the business instead. He can't just issue a dividend to shareholders and then keep the money.

Although companies can pay directors' salaries perfectly lawfully of course which is why people setitng up companies have shareholders' agreements which include a clause saying no directors to get a salary over £X to stop that happening. Only once those kinds of expenses are paid - his £200k salary, his £50k car, his lovers's massive consultancy fees do companies then have something over for dividend. The company however may ahve declard a dividend if it had profits available to distribute as dividends but not necessarily.

I would look at the offer he made before. There have been quite a few cases on when offers expire, when they are still open for acceptance etc - it's a bit of a legal minefield the law on offers but it is possible you could still accept it or if not he may make a similar new offer now

As a shareholder, you have a legal right to call a meeting, and to be present at that meeting.

OP yes it is financial abuse - I tried all the things listed on here - the meeting - he wanted to vet who I wanted to bring - as for sending a letter to the accountant - he was seeking advice from the accountant to stitch me up- directors loan does not necessarily mean a negative business value - it’s a way of taking out money without issuing dividends - my x did all this purely out of spite - as for not issuing a dividend and keeping the money - yep did that too and i ended up having to pay tax on them!

I’ve had counselling op - just been referred back for the third time - with all due respect to Xenia she was lucky enough to resolve without court - these men aren’t interested in communication - they just want to destroy and will go to extreme lengths

I had 2 day hearing - a complete farce - but that’s another story!

Good luck op

@greenberet & @Xenia I did ring him today and ask did he want to make another offer and he said he doesn't. He said that I'm going to come out with far less because I've pushed to get the business valued and it's my own fault. I've asked him does he want to go to trial or to mediate first and he said he would like to mediate which is a good sign as he's always been gunning for trial. I can understand that from his point of view he is under a lot of pressure too and I think in order to pay my cards right I might need to play on his ego a bit.

I'm convinced this will all work out in the end. It has too. It's the only way I can get through it. Just having faith that things will be rectified. I just want an equal or at least fair share and for everyone to keep their jobs.

@greenberet I'm so sorry your going through financial abuse too. It's a horrible thing to experience and because you don't have physical scars often people don't understand how totally and utterly soul destroying it is. Keep your head up, things will turn around. Don't become angry and bitter like your ex. I figure if we get through this we can get through
Anything.

Mediation sounds like a good idea. The question will be if you want to pay £10k for a business valuation to go into the mediation with that report or attemkpt a value based on what you know the turnover to be (and what the true profit would be if he only paid himself a much lower salary and you were both getting equal dividends). Taking money out by directors' loans from a company is not necessarily wrong although it sounds like a lot of what he did was to damage you.

You might want to hire a mediator for a day who is a company lawyer and trained mediator who has done mediations relating to business valuations rather than someone who is just good at getting divorcing couples to compromise just so they would understand issues of how to value small companies.

I am afraid you are right to play to his own psyche too however awful that will feel because if you can make someone think they have won even if they have not that can be a good way to get at least some of what you want.

It sounds like you had a 2 day hearing in England which was probably the usual first court divorce hearing (we didn't have any hearings as in my divorce we just negotiated the terms without that and without financial disclosure as we just had joint everything and knew everything and were still in the same house) and next and last would be a final hearing and you could try mediation instead of that.

On the workers I have had quite a few cases where an employee has raised funds to buy a small business out from the owners eg with payments over 5 years as they could not get a big enough bank loan to pay it all at once. If your husband wants to close the business and will not let you take it over in place of him/put a manager in then selling to one of the workers might be an option. A competitor might want to buy it too - that might at least get a flavour of the real value - what someone else might pay for it as well as valuing the assets although sometimes there are few assets (like freehold premises, expensive factory tools etc) just the skills and goodwill so it is hard to generalise on here.

@Xenia would you believe I just ran into an old employee today and I put it to him we wanted to sell and be is actually really interested in buying the business. He is going to meet my ex for a drink and see if they can sort something out with strict instructions that I've had nothing to do with organising it. It's all so devious but I just don't want anyone to lose their job because of this.

He's told me my ex has fired a few people in the past year and been running the business badly. I texted those who had then fired, one ex and employee called him a "butcher"! They are going to ring me tomorrow with more details of what's been happening since I've been frozen out. So that should be interesting.

Im hoping to get a mediator who is aware of commercial law, I originally had a barrister to represent me for this last year but my ex contravened court orders about the valuation so it couldn't go ahead. The original mediator was actually an accountant before becoming a lawyer then a court appointed mediator so he would have been ideal. Fingers crossed I can get him
Again.

Best case scenario is that I can get the mediator to give me a portion of the assets equal too or slightly less than what was offered 190k & and we get to sell the business to employees so no one loses their jobs. Win win for everyone.

Sounds a good plan. Good luck with it all.

Ok so old employee rang me today and has told me he will write a statement for court that the girlfriend does no work so he is using her to launder money out of the business. He actively has transferred assets into her name. And requested ex employee to have assets out into his name. He's actively told people that he does not want me to get my share and he wants the girlfriend to get my half.

I've also just found out that he's a massive cocaine user. His apartment is meant to be filthy and unfit for kids.

I'm in such shock right now I don't know what to do.

Surely if he has bought property with a loan from the business and your dividends, that is a marital asset (in his name) not a business asset? Also, if he closes the business, he would have to pay the loan back. How were your dividends (share of the profit) that were used to purchase the properties paid out? Into a joint bank account, your account, his account or was payment made straight to the business? In fact, how were all your dividends paid? If he has been issuing dividends to you but you never actually got the money (eg it went straight into his account), you might want to point out to him that is fraud...

I would also ask him for all the dividend paperwork to show what dividends were paid and when (which I'm guessing he may not have actually done as you don't have to file them unlike accounts). If they don't match up with reality, it could cause him all kinds of problems.

You might find he is more amenable to negotiation if he doesn't want anyone going through his accounts with a fine toothcomb.

Good points. It sounds like the Irish properties are in his sole name. I don't know the respective values. If the properties are worth say £200k each and the business might be worth £300k possibly £500k it may be worth trying to get both or one of the properties and be done with it.

the problem is the disonnect between what the law can do and what it costs to achieve it. Eg I know someonewhose wife had all their savings of about £1m frozen by her divorce lawyers in the accoutns as they thought he would put that money into his employer's business (he was obliged tod o that for his employment - they invest in what the company invests in as it shows clients they all have skin in the game). As there was £1m or something at stake even £60k legal costs to secure that was worth it. If there is £10m gone to the girl friend here then spending £60k to freeze her bank acccount might not be worth it and hard to prove - it all hinges on how much money we are talking about . However the statement from the ex employee even though he may be taken to be biased if he is "ex" might help in persuading the husband to hand over some or all of the Irish property instead.

@runoutofnamechanges yes it's classed as a marital asset, the main issue is the amount of tax debt he has run up in the business which is 100k which is affecting cash flow and I fear the value. Should the value of the business be small, then I'm eligible for a smaller portion of the total property pool. Possibly less than I was originally offered so the stress is very very high at the moment.

Dividends have never come
My way. I'd have to bring a seperate action against him
Retrieve that, as it would come under commercial law again and not family law.

@Xenia I spent today trying to get some free legal aid where I can. It's proving near impossible. All my trial documents are due on the 19th of feb, so realistically the valuers have a week to prepare the valuation (this normally takes 6 weeks) and provide me with the information before I submit my affidavits. My ex is again stalling on providing them with the relevant documentation. I'm literally banging my head against a wall. How do people do this as a career. It's soul destroying