Can anyone who's business savvy advise on problem with fairly dividing shared business with ex-dp?

[Twoddle]

My longterm partner and I separated in November. We co-own a business which we set up when I was expecting ds. I have a 49% share. Ex-dp has 51%.

We are not closing the business as such - ex-dp will continue running that, but under a different guise. I will get my 49%, his 51% will stay in the business, and he will continue to run it effectively as a new entity, but with the same staff, client base, etc.

I have been advised that, because ex-dp will be taking his 51% plus a functioning, money-making entity, while I will be taking my 49% only, some kind of "goodwill" needs to be paid to me in recognition of him moving forward with an actual operational business, iyswim - and me not. This could be a goodwill commission on future profits, or some kind of upfront payment on top of my 49%. However, when I have put this to ex-dp, he has said that he is the goodwill (!) element of the business, and that my 49% is more than enough. He is categorically opposed to this suggestion, and says the business cannot afford it.

I am not on the take, but I do want the business to be divided up fairly, because once it's been split, there's no reversing an erroneous decision - which I may end up agreeing to out of lack of knowledge.

I will be seeking the advice of an independent accountant. In the meantime - and before meeting ex-dp to discuss this tomorrow - I want to be a bit more in-the-know: I wonder if this "goodwill" matter makes sense to anyone who's business savvy, and if they can advise on a fair way to proceed?

Thank you.

Bump

Hi Twoddle

It all depends. Is you business a company or a partnership. Do you have any legal documents ruling the relations between you and your DP. Need more fact really.

If your business is a company and you have 49% shares, then you need to get your shares valued by an accountant (indep preferably) and that should take into account the goodwill.

If you are operating your business in partnership, it is trickier. If you can afford to, I would go and see a good commercial solicitor. Where do you live? It will be worth it in the end. Don't let him spoil you of what is lawfully yours

please don't mind appaling spelling in previous post...bury head in sand in shame

Thanks, all. Will check links in a mo.

needahand, we have a limited company and I have a 49% share and he 51%. He's the MD and I'm a co-director. The accountant who's been coming up with a dividing-it-up plan for us is, you guessed it, the company accountant with whom he's been working for four years anyway. (I've been largely hands-off in recent years, since having ds and my jack-of-all-trades skills being eclipsed by new staff.)

I will be getting a second opinion on her figures/options from an impartial accountant of my choosing.

I thought the valuation of the company must take into account goodwill - as you say. I believe, from the fuss that ex-dp is kicking up, that the options come up with so far do not.

Do you know of a good commercial solicitor in the Central South?

Really helpful, needahand. Thank you. Spelling forgiven!

Useful articles, SueW. Thanks.

Looks like it's to be a balancing act between preserving the business and it's potential to continue in a healthy capacity, and honouring our respective shares in the business and our agreement that all profits and assets of the business would be shared equally.

Hi Twoddle

Glad the spelling is forgiven

What do the article of associations of you company say about transfer of shares? Anything?

Also do you have a shareholder agreement with your DP?

Sometimes there are restrictions on transfer and/or provisions about the valuation of shares. If there are, chances are you would be bound by those whether favourable to you or not

As I said you should get the shares valued by an indep accountant definitely not the one who does your accounts (just to be on the safe side).

The fact that you haven't been involved in the company is irrelevant. You invest some money, you get some shares. The company has a value, that value is split by shares. End of story. This is not like a partnership where partners who are more actively involved sometimes get more of the profits.

Re South Central, possibly, where exactly are you? (county or town would help)

Let me know if you have any other queries.

Usually the value of a business will be more than the sum of its assets, but the nature of the goodwill does depend on the nature of the business. If you take a restaurant for example - some of the goodwill is actually going to be reflected in the property price (location is everything), some is going to be based on the talent/reputation of the chef and of the staff. The latter is at best fairly fragile and may be limited to the notice period in their contracts, so a willing buyer might not wish to pay more for the company than the individual price of the assets.

You need to find someone who is experienced in valuing companies. They will also need to look at your rights under the Articles of Association. As a minority shareholder it wouldn be uncommon for the value of your shares to be 49% of the value of the company as the single majoirty shareholder has a number of additional powers that you don't. But these will vary depending on what the Articles say.