In 2019 we established a garden maintenance business, which was set up as a general business partnership between two people. A business partnership agreement was signed by both of us in the presence of a witness. The net profits of the partnership were apportioned amongst the partners equally. I originally spent £5,000 of my own money to purchase equipment and a van, which my business partner then gave me £2,500 for his share when the business became profitable.
I carried out all of the research to set up the business, created a website, designed flyers, advertising etc., whereas my partner did none of these. We both carried out the gardening as a two man team. My other roles in the business where advertising, the daily planning of jobs, research and development, accounts and invoicing and completion and submission of tax returns. My business partners only other role was to text or call the customers from the daily job list I gave him.
His behaviour became very erratic about 18 months ago. He became aggressive during work, throwing tools in anger on a couple of occasions. He insisted he needed to be at home before 5 o'clock every day as he had a dog to care for, which made planning work difficult. His general attitude became lacklustre and negative, with no intention to improve the business.
In September 2021, he sent me an email out of the blue saying that he wanted to end the business partnership. He refused to answer my calls or texts to discuss things further. When I eventually spoke to him, he told me he "wasn't in a good place". I told him to have a couple of weeks off to think about things, whilst I ran the business on my own. After a week he came to see me to explain he had made a rash decision and he would like to continue with the business, to which I agreed.
Since then, there have been numerous days where he has not worked. He notifies by text early in the morning, saying that he can't work today, which causes me great difficulty as I have to contact customers to postpone or re-arrange their visit, which is very unprofessional. In June of this year, he took a weeks holiday during the busiest time of our year.
On 9th August 2022, he sent me a text at 4 o'clock in the morning saying that he was too unwell to work. Since this date he has not carried out any work in relationship to the business. I have continued to run the business on my own, working 7 days a week and averaging 80 hours each week. I feel the need to do this to keep the business going as we have a number of regular, loyal customers.
On 10th September 2022, he sent me an email informing me that he will withdraw from the business due to ill health once I have "bought him out". He informed me that he had spoken to an advisor in commercial tax law and that he was entitled to a "goodwill" payment. The formula he was told to use was :- (Income Year 1 + Income year 2) divided by two. He claimed he was not using the income from year three and four as he had done very little for the business during those years.
On 22nd September 2022, he sent me a further email claiming that the figure he was requesting does not represent the true value of the goodwill of the partnership, but should be based on 3 years of trading. However, in order to expedite the process by avoiding the necessity of accountants and solicitors and for the steady continuation of service to our customers, the original formula he suggested would be received amicably and accepted. If the payment was paid before 01/11/2022, this transaction will effectuate his immediate withdrawal from our partnership and all his assets and interests therein be transferred to me.
Is a goodwill payment relevant in this situation and if so would you say my business partners request is reasonable?
Clause 14 of our business partnership agreement- "Termination: This partnership shall be terminated by the death or material incapacity of any partner, mutual agreement, or upon the written request for termination made by any one partner. Upon termination by reason of death, incapacity or request, the remaining partners shall have the right to continue the business of the partnership on their own behalf or together with new or additional partners, provided they pay the terminated partner the fair market value of his partnership interest together with suitable indemnification for all of their existing partnership obligations.
Clause 13 of our business partnership agreement - Authority: No parties shall, without the consent of the other partners: Pledge, hypothecate or in any manner transfer his interest in the partnership.
Is my business partner in breach of clause 9 of our business partnership agreement, especially as he claimed he did very little for the business in the past two years. If so, what action could I take?
Clause 9 of our business partnership agreement - "Duties: Each partner shall devote his full time and best efforts on behalf of the partnership business."
Is there a Fiduciary duty breach as the duty of loyalty requires partners to place the success and interests of the partnership above their own personal interest. I don't feel my business partner did this, so what action could I take?
I am also concerned that my business partner has access to the business bank account even though he no longer contributes towards the success of the business. What options do I have to remove him from the mandate?
Although the profits were shared equally between the two of us, the work load was not, especially in the past two years. My extra roles included advertising, the daily planning of jobs, research and development, accounts and invoicing and completion and submission of tax returns, which my business partner was unwilling to do. I regularly carried out an extra 20 hours per week to carry out these duties. Is there an option to invoice/charge my business partner for this extra time?
Any advice on where I stand and a course of action to resolve this would be greatly appreciated.