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UK-Justice, Barrister
Category: Law
Satisfied Customers: 16193
Experience:  Called to the Bar in 2007
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I am a director in a small limited company. I own 60% shares

Customer Question

I am a director in a small limited company. I own 60% shares and the other director owns 40%. We started as a partnership in June 2011, i invested all my savings in the business (approx 20k) in the first year of trading. My partner had no money to invest. I generously gave my business partner 40% when we incorporated and became ltd in August 2012. The business has only just started making a small profit and has a turnover of approx 91k.

The other director is now threatening to resign and then start up a competing business in the same town. The business is a beauty salon. The other director is a beauty therapist and has a client base and has recently taken home a copy of our other 2 therapists client base. I am the older director with the business and sales skills, who has worked extrememly hard selling the services & the therapist.

At the end of the partnership before we went ltd - i was owed approx £8k due to my partner taking a higher withdrawal that her 40% from the business. I was owed more due to the money i had invested... What happened to this when we went limited? Can i still ask for this money back?

Worse than all of this - we do not have a shareholders agreement in place or any form of directors agreement.

She has said she will only sell to me if she can open up down the road. Obviously this is not an option for me, i dont feel i should hand over any more money when i have taken so little back, she has taken higher withdrawals/salary than me from the business to date and i would then be taking on the lease in my name only (i think) and she will set up a business to close me down

Is there anything i can do? What legal rights or options do i have, if any? without a shareholders agreement...
Submitted: 3 years ago.
Category: Law
Expert:  UK-Justice replied 3 years ago.
Thanks for your question, I will do whatever I can to help you. Please remember to rate my answer SMILEY FACE OR ABOVE.

When you said owed £8k, is this something that is agreed you are owed?
Customer: replied 3 years ago.

This was the figure of the closing balance of the partnership accounts before we incorporated. The business showed it owed me approx 12k and that my partner owed £8k - this was due to her taking a bigger withdrawal from the business in the first year.


Customer: replied 3 years ago.
Relist: Other.
No answer received?
Expert:  UK-Justice replied 3 years ago.
Bear it mind it was midnight so I was sleeping!

So your partner actually owes you £8k personally?
Customer: replied 3 years ago.

Yes - i think so. It is where she took a bigger withdrawal from the business than me during the partnership.


Expert:  UK-Justice replied 3 years ago.

In that case your partner still owes you personally the £8k.

That debt is still owed and unless it was agreed it would be written off when you had the ltd co then it still exists.

Partnership debts and jointly liable so that debt continues until paid.

What the director can not do is contact existing customers. There is an implied duty in law of good faith.

As such if she tries to contact customers you would be able to seek an injunction to stop this happening.

If the injunction is breached then she could be sent to prison for contempt of court.

But you would need a solciitor if this happens to draft proceedings and present your argument in court,

I realise that this is stressful but hope this helps.

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Important: If you feel the need to rate as one of the lower two scores, it counts as negative feedback so please reply to me via the REPLY with any further questions you may have. I will be happy to assist you further.

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