Is this legal? Please help

[NotsoLegalEagle]

Am a regular but have namechanged for this

A much loved family member's DP invested a good sum of money (over 15K) in a business a while back, along with three other people. Before investing, we advised him to have the business audited, books inspected etc

He put this idea to the team and they refused. They all put the same share in and he did the same (very silly I know but I don't think he predicted the situation now) and did so on word of mouth/handshake rather than having papers drawn up and signed (again, very silly)

One of the partners says he is now bankrupt - although we are not sure if this is the case as we have checked his details on the bankruptcy website and he is not listed on there.

Either way, the business is being sold...even though there are other partners involved. We are not sure if they will get their money back. I'm not even sure if it can be sold if others have a share in it..its only a small local business mind, nothing national/global

Meanwhile, the new 'owner' has cut this person's wages and despite being a partner, with X amount of money invested, his wages work out as no more than £2.50 per hr

This is all so suspicious and legally very questionable. This poor person went into this thinking the partners were friends, it was a viable business and an investment for his retirement. He realises now how crazy he was not to have papers signed up or to have gone about it the way he did

The only evidence he has of his share is the money that was transferred from bank accounts

He is worried sick, very down and losing weight.

Is there anything that can be done regarding this? He is understandably reluctant to see a solicitor as he realises how foolish the whole venture was

Any help or advice would be appreciated

Thanks

If he is only being paid £2.50 an hour that is below the minimum wage, so that certainly isn't legal.

As for the rest of it, he has certainly been foolish. The lack of any formal agreement and his failure to check the business out properly leave him in a weak position. However, this sounds like a fraud to me. He certainly needs to see a solicitor to get some advice. He may also need to report the whole thing to the police. Feeling foolish won't get his money back. He may not get his money back anyway. But at least he can stop these "friends" doing the same to others.

Its not a timeshare scam or anything like that...was a genuine business that he actually worked for and then when it was going to be sold, he and some others decided to keep it going and bought into it

Apparently the pay cut is so that the business can keep going for the time being but I'm very suspcious of it all...he's feeling terrible about not going down the proper route but hindsight and all that...

Its making him ill

what sort of business is it?

• partnership in which he if a partner
• company in which he owns shares

or in reality has he just put some money into the business and is owed it back, but doesn't have any ownership?

hard to tell without any paperwork but there should be accounts made up each year, and he should have had something supporting the money he takes from the business which would indicate his ownership stake.

If company, then his shares (for which he should have a certificate) can't be sold without his agreement.

ditto, if partnership without a partnership agreement then it can't be changed without his (and others) agreement.

if a loan, then he is more stuffed - but could apply to court as a creditor.

Re national min wage - if partnership then this doesn't apply, nor does it apply if he is a director without a contract of service. Otherwise, yes it is also potentially an issue.

Thanks for answering

What sort of business is it?
A: It is supposed to be a partnership with others ie all joint owners

If partnership without a partnership agreement then it can't be changed without his (and others) agreement
A: Although they each put in X amount each (same amount btw) doesn't seem to be going this way as the partner that 'went bankrupt' (if he's telling the truth) sold his part of the business for a nominal sum to an external guy and this guy is now calling the shots, even though others have a stake in the business

Re national min wage - if partnership then this doesn't apply
A: Yes I can see this point, but it doesn't seem as if the wage drop has been agreed equally, rather this new guy is dictating all the terms

Sorry to be vague but obviously need to be careful

well, I guess they (the other 3) have to stop him calling the shots - he can't just do so without them (effectively) letting him, so if they don't like what he is doing they need to overrule him.

Suggest legal advice may be needed.

If it is a partnership without a formal agreement agreement then the terms of the Partnership Act apply.

He should get legal advice because all the partners are jointly and severally liable for the debts of the partnership - this is unlimited, so they can take his house even if the partner has run up the debts.

An alternative is to negotiate a buy out of the bankrupt partner - Centre for Justice could help mediating this.