Who owns this stock?..

[Blueotter22]

Hello wise MNers,

Wondering whether anyone could help or give me their opinion on who is “right” in this situation.

My Dad was previously 100% director and shareholder of a Ltd business. His business was on Amazon selling socks, he built this brand from scratch and had made a success of it when he suddenly passed away in 2021. He ran this business on his own and put in a lot of work to build the brand.

Due to circumstances which are not super relevant (and a very long, sad, story) my Dad did not have contact with me or my siblings for most of our teen/adult life (messy divorce/abuse at home) and so for the 10 years prior to his death we had no contact from him at all and didn’t know where he was or about the business. I was an angry teenager when he left and for years held a lot of anger towards him, but once I became a Mum myself and now work with children who have experienced trauma - I had processed the past and sadly was trying to find him in the few years before his death as I was willing to forgive and try to have a relationship with him.

He died without a will in place, and no spouse or other immediate beneficiaries. So his estate, including the business will be inherited by myself and my siblings - no objection there from anyone.

I have taken over as director of his business (while trying to juggle my full time nhs job) all with the aim to continue to build his brand and keep his legacy alive. In a weird way it’s almost like it’s the only thing I have of his and I feel healing from growing the business and hoping I am making him proud/ I forgive him.

anyways sorry…to the legal bit.
3 months before he died, he updated the return address on Amazon to his sisters address. He was living abroad at the time and needed a UK address to send his stock to. The product we sell is mainly aimed at wet/cold months so during the summer sales are low and Amazon charges storage fees. She agreed to keep his stock in the UK with the aim of him putting it back on Amazon when he needed to. He sent retail value of approx £20k stock to her address (she also has a business so has the storage) and I only just realised this as I’m still getting my head around Amazon and trying to juggle it all.

I found out recently that she’s been selling the stock on Facebook marketplace for £10 per item (which is roughly cost price now) and keeping the money. She has over 600 units of stock and hasn’t mentioned it to us at all.

Ive asked if she can return it to us and she’s said it’s hers to do what she wants with and that my Dad verbally agreed that she could sell it and keep the profit, but it makes no business sense at all for him to agree to that!

So basically, is it worth pursuing it through the courts?
I can’t prove that he didn’t verbally agree to it, but it just makes no sense that he would allow her to do that. Also, legally would that stock be mine if I’m now 100% director and shareholder, of the business and its assets. The stock was paid for by my Dad, I can prove that and trace where it came from and that it was delivered to her. I can also prove that there was no payment from her for the stock.

I feel like its unfair as I’m trying really hard to keep things afloat for him and to be selling his product at cost price undermines the business and his legacy.

thanks so much if you got this far, I’m sorry if it doesn’t make sense. It’s a complicated situation!

The stock was paid for by my Dad, I can prove that and trace where it came from and that it was delivered to her

But do you have proof that the arrangement was simply for him to store it there? If not, then it seems he’s just sent her a £20k gift of an awful lot of socks!

You don’t know that he didn’t agree for her to start selling them for the inconvenience of having to store them. How much money would you be prepared to spend pursuing this through the courts when they had a relationship, but you hadn’t spoken to him for 10 years, so have no real clue want he is likely to have actually said to his sister?

I sorry, and I know it seems unfair, but I think it will cause you more heartache and stress in the long run.

The socks belong to the company, not to you or your aunt.

I think I have proof, old text messages from my aunt after he died to say she was holding his stock to save on Amazon fees but I was so busy at the time with everything (he died overseas under suspicious circumstances and I was fighting with the embassy at the time) that it wasn’t a priority. She didn’t mention exactly how much stock was sent, it was only recently I was able to see on Amazon how much was sent to her. If it was like 50 pairs I wouldn’t really pursue it but it’s over 600 units that would have cost the business over £4k with a retail value of nearly 20k, so I just can’t understand why my Dad would gift her all those socks to sell at cost price on Facebook when he would have also paid for shipping and delivery to her address.

Sorry yes, I know that everything that belongs to the business is owned by the business and not me as an individual.

My aunt is quite unhappy that he died without a will and doesn’t think it’s right that we inherit his estate when we “didn’t care about him”. Which I can totally understand her view on that but she has never had a relationship with us either and she has no idea what happened in our childhood and how it came about that we were not in contact. So I think part of her holding the stock is down to her personal feelings about us.

Her views on whether you should inherit are irrelevant. She can't take stock belonging to your father's business just because she disagrees that you should inherit.

This is clearly above the small claims limit so I would suggest consulting a lawyer. If this goes to court, it will be decided on the balance of probabilities. You won't have to prove that your father didn't agree to her selling the items. Unless she has some proof that he did, she may struggle to convince the courts. But a solicitor who is in possession of all the facts and has seen your evidence will be best placed to advise.

If the cost of the stock was £4k then I would say you’re within the small claims limit. Send her a letter before action, and issue small claims proceedings if she doesn’t return the stock.

While you don’t have definitive proof it wasn’t a gift, she will presumably have no proof that it was. The judge will decide on the balance of probabilities, and to me your aunt’s story sounds improbable!

The stock is owned by the limited company, no doubt at all about that.

The shares in the company will be inherited by his next of kin, ie you and your siblings.

The new shareholders will have to decide what to do with the limited company and the stock that is owned by it.

I would be categorically stating to your aunt that she must not sell any more of the stock. I would also be making arrangements to move the stock so she doesn't have any more access to it.

What you do about the stock she has sold is up to you and your siblings. You can say you want the sale value from her or you can write it off as payment for the storage. Just be aware if the business is registered for VAT there may be implications.

You need a lawyer to (I think) refute your aunt’s claims

I also wonder whether you have been appointed Director of your late father’s company or have any other legal status reflecting the work you are putting in? If you do not, it may be the case that you are legally expected to share the proceeds with your siblings on an equal basis. Again, you need legal advice

The stock is owned by the company not an individual

You need a lawyer to act for the company, and send a letter to the aunt reclaiming the stock. Hopefully a solicitor's letter will be enough to get her to see sense. If I was you, following the solicitor's letter laying out the facts (the law is on your side), I would ask the solicitor to negotiate that she can retain a small amount of stock/keep what she has already sold without penalty, in lieu of storage fees.

The stock was owned by the company and the company is now owned by you and your siblings jointly

If she’s acknowledged that the stock was company stock but is now claiming ownership of the stock in her possession, she’s going to have to prove why its hers I would think.

Get a lawyer to sue her in the small claims court for return of the stock (or in a higher court for the £20k retail value).

It may come down to your word against hers but if you can get any acknowledgment from her in writing (eg text message) that the company owns the stock and the readon she won’t return it is that she doesn’t think its fair you inherited, you might be able to convince the judge

Worth a try. Be very aure though that you’re happy to destroy whatever your current relationship is with her.

I went off the retail value, at which level it is clearly not a small claim. However, if it is a small claim, DO NOT get a lawyer to sue her. Do it yourself. You won't recover your legal costs if you use a lawyer for a small claim.

The stock belonged to the company and if the company hasn’t accounted for it or written it off to give it to her in some way then it still belongs to the company. There would be a paper trail. The most she could claim would be storage fees. Which would be tax deductible by the company and she would also need to account for for tax reasons. She’s a bitch to do this. The company needs to make a claim against her for the return of all the stock or compensation for the stock she sold for personal gain (again, does she really want to be investigated for the sale of that stock because I bet she hasn’t completed a tax return for it!).

Ps. I don’t think your dad could have legally given it to her. You can’t just take shit from your ltd. Company and give it away personally.

Also, is it theft of the company's property?

It's been many many years since I did accounting but I would look into the chain of transactions so you have evidence this was bought with company funds and not your dad buying it from his personal account with no follow on chain of this then passing to the company with the relevant entries in the assets/stock register and directors accounts. You don't want to find she has a 'reasonable' response that they were setting up a separate entity together and you've wasted money and time on it.

Socks don't belong to you, your father or his sister.

The stock is a company asset (I.E) belongs to the company. If she won't cooperate you'd have to take her to court.