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Original poster

Director wants money from loss making company

14 replies

Dk20 · 26/04/2020 15:13

2 directors set up a company 3 years ago, 50:50 shareholders.

Neither have taken a salary and have worked 1 day a week for the company since then to try and get things going.

The company hasn't 'taken off' yet so neither director has taken any money from the company.

The company is loss making and as it stands owes 20k more than its assets are worth.

The directors have decided to part ways, one has decided he will leave the company and the other will take over completely.

The accountant has given the go ahead with this and said the shares are worthless, so if one director/shareholder takes over it would be fine, the director/shareholder leaving wont be owed anything.

Now the director leaving has said he wants 10k for the time he has put into the company over the last two and a half years. Is he entitled to anything?

OP posts:
cstaff · 26/04/2020 16:10

If the company is 20k in the red and neither of them have taken a salary then surely he should be offering half of loss back to the partner holding on to the company. I know nothing about company law but that is just common sense speaking.

Elieza · 26/04/2020 16:23

Yeah it does sound like that ie the one leaving gives the one keeping the company his half of the £20k debt?
Either that or the company’s debt would increase to what £20k each minimum salary (if one gets they both get) plus the existing £20k debt so a total of £60k debt?

But what do I know about such things.

Collaborate · 26/04/2020 16:41

Who are the creditors?

cstaff · 26/04/2020 16:44

Tell the one who is leaving that he is doing well being allowed to leave without being charged 10k for his half of the outstanding debt (presuming you just want him gone). Hopefully he will just fuck off with his tail between his legs.

Original poster
Dk20 · 26/04/2020 16:46

I would have assumed the same.
The creditors are mostly loans used to purchase machinery. About 5k then are other trade creditors.

OP posts:
Original poster
Dk20 · 26/04/2020 16:47

And the two directors signed directors guarantees for the loans

OP posts:
Original poster
Dk20 · 26/04/2020 16:48

@cstaff he said he is going to seek legal advice, but agreed I would gladly hand it over if it were me

OP posts:
CayrolBaaaskin · 26/04/2020 18:35

If the shares are worthless, why does he expect to get paid for them? Also if he has given a personal guarantee for a loan, he will remain liable unless the bank agree to let him off.

Original poster
Dk20 · 26/04/2020 18:49

@cayrol he thinks he should get money for the time he put into the company, as he has never taken a salary. Hes completely disregarding that the shares are worthless. Can he suddenly decide he wants a salary given the circumstances? He has never taken wages from the company and no salary has ever been accrued in the accounts.
With the personal guarantee I understand that if he is no longer a director, someone else can agree to take over his guarantee.

OP posts:
StealthMama · 26/04/2020 18:58

He's trying to sell his share of the company as a profit making going concern, which it isn't....

He is responsible for 50% of the debt and should honour that in order to exit a loss making business. Or you both write the whole thing off and declare it bankrupt. Or you take the whole debt on - but if it's not working after 3 years, it isn't going to work full stop. No business can make money off one day per week effort...

I'd write it off completely.

CayrolBaaaskin · 29/04/2020 01:56

@Dk20 - he can’t decide he wants to get a salary now no. Apart from anything else, the company has no money to pay it. Someone else could take over his guarantee but what is the incentive for anyone to do that, when the company is worthless and loss making?

Isleepinahedgefund · 29/04/2020 07:21

He isn't ENTITLED to a salary.

There is no money to pay out - simple as that.

The shares have no value = no money.

Re the PG being transferred, the lender doesn't have to consent. Plus anyone would be insane to take over a PG given in respect of lending for a loss making company.

And by the way all parties who signed the guarantee are 100% liable for the whole debt - not 50/50. That's what joint and several liability is - basically they can get all their money back from whomever can pay.

SunnyStroll · 29/04/2020 07:46

It depends how much the remaining director wants him gone.

All the time he stays, he owns half the company, so if it does take off, he will be owed half of what it's worth in 10 years' time regardless of whether he's put any work in.

He can't demand 10k but equally he can't be forced to go without it.

Who is the £20k debt owed to? That's huge for a business the directors were only putting 1 day per week into. Did they put any start up cash in themselves?

Collaborate · 29/04/2020 09:08

Offer him an indemnity for the loan guarantee.

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