Small company director - co director has asked me to resign from our business. Can I ask for the money I originally invested into business back if she goes it alone?

[oldboiler]

Just that really. Friend and I set up a business 6 months ago. We've since had a disagreement that I'm not investing enough time into it as her (as I have a toddler ) and she wants to continue from now on without me. She has asked me to resign as director (we both have 50/50 share in business). I am happy to go as the business has been very stressful and we haven't made any profit yet, however I invested money into initial start up costs (website/registering company name/marketing etc) and would like this back (only around £500 so not huge) . My argument is company now more established and my investment helped that . She disagrees and says I will have to suffer the loss as that's a risk of business. Is that correct ? Surely if she carries on without me and now starts to make a profit my original stake has her helped her to get to this point so she technically should buy me out ? I'm not asking for any money other than what I ploughed into the company to launch it.

I think you need some legal advice here. Did you have an agreement drawn up when you established the business ? If so there should be a clause which covers this sort of thing. If you don't have an agreement, you need to get some legal advice, although it will probably cost you.

No agreement other than us registering company officially (DuPont) and us holding 50%share each. Thanks for speedy response though .

Surely she buys you out for 50% of what the company is currently worth? Unless she did all the work and can persuade you to sell your shares for the original investment.

Get legal advice before you agree to anything.

Resigning as a director is different from giving up your shareholding. Your shareholding isn't worth your original investment, but 50% of the value of the company. There are various different ways to value a company but if it's only 6 months old and not making a profit then I doubt it will be worth much. You need an accountant.

If it's a ltd company that you will not be personally liable for future losses.

Well she can ask you to take the loss and you can decide not to resign!

Tell her she has to buy you out for at least the £500 or you will get an independent accountant to work out the fair value of the company and sell her your 50% for half of that

Well the company won't be worth anything as 6 months on and no profit so all I'm asking for is exactly what I've put in. Of course might be worth something in another 6 months which is why I'm reluctant to sign my half over to her now without getting my original investment back first. Assume she can't kick me out without my agreement ? And I won't agree until I get the money I've put in back first.

Sorry missed some posts before I put that. So it could be worth something even though we haven't been making any money ?

You will have assets (like the website domain) and if you have built up stick, for example, there is the potential profit.

Is she happy for you to retain 50% of the equity and thus 50% of future dividends?

Thank you. It is basically a monthly publication we have been producing which is funded by advertising . There is also a website. I basically paid into producing the website and we had to pay to publish the first issue as there were not enough ads at that stage to fund it completely. She will not be happy for me to receive any future dividends or equity at all. Does this mean she would need to repay what I've put it if she doesn't want me to ?

Based on what you have said then yes. But I would tell her that you will have to get advice if she doesn't give you the £500. Might push her to do it

Did you get any advice when you set up?

Well if she doesn't want to pay you out she has the option of leaving and setting up a new company from scratch. After all if she doesn't think the company is worth anything then she won't have a problem with that will she? She can sort out her own marketing, website, etc.

Saying the company isn't making any profit currently isn't really the point.....a lot of companies won't be making money six months in. But as it starts to take off it will do. Therefore there is more of a value to a six month comoany than a new one, especially one with a set up website.

I think that the money you put in is kind of irrelevant (sorry) unless you had some legal agreement in place.

But she can't force you to resign and you don't have to.

It's worth noting that directors of Ltd companies can be personally responsible for company debts etc if they have been deliberately trading when insolvent etc.

If she wants you to resign, and give up your shares, I'd be starting by asking for the £500 plus remuneration for your time put in so far, plus a sum to cover all future profits /dividends you would miss out on.

You don't have to sell her your share at "market value" you can sell them.for whatever you want.

Don't think Amazon or Spotify have posted profits yet. Doesn't mean they don't have a massive value.

You will win 50% of the magazine name and brand and other intellectual property associated with it. Think you need some proper legal advice.

Win = own

Thanks for all advice. So think general consensus is I'm being perfectly reasonable asking for my £500 back and could ask for more if I really wanted? She is seeking her own legal advice this week. Id rather not have to pay for it at this stage so I'm hoping her solicitor will tell her what I want to hear and she will agree to pay up and then I won't have to fork out for legal costs .

Do you have any partnership agreement at all?

It seems clear that people can't get others to invest in a business and then tell them to sod off a few months later. Of course you need your investment back. If she refuses, you still own half the business - does she really want that?