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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3653
Experience:  Solicitors 2 years plus PQE
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I have a new business with a partner and 2 shareholders. It

Customer Question

I have a new business with a partner and 2 shareholders. It is still some time away from making a profit so the other director and I have been supporting it financially. My co director now wants to leave the business and is refusing to pay their half of the finance required for the business to continue, so I am having to pay all of it. She also wants her investment back. I am unable to raise the money at the moment. I have put in considerably more than her and the business requires a substantial investment to continue. Unfortunately it also requires her input on our application to a government body that is essential for the future of the business. She is refusing without her money back.
Where do I stand ?
Submitted: 2 years ago.
Category: Law
Expert:  Nicola-mod replied 2 years ago.
Hello,
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Nicola
Customer: replied 2 years ago.

Hi Nicola, Yes I'll wait and see if anyone replies.

Regards

Dave

Expert:  Nicola-mod replied 2 years ago.
Hello,
We will continue to look for a Professional to assist you.
Thank you for your patience,
Nicola
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
Do you have a shareholders agreement? How does she want her investment returned - does she want you to buy her shares back or repay a loan etc?
Kind regards
AJ
Customer: replied 2 years ago.

Hi Alex

Thank you for your help.

Unfortunately there was no shareholders agreement. I know ...big mistake.

She wants a lump payment to buy her shares back. I think the she has invested about £12000 I have invested over £21000 and she is rufusing to pay her half of the bills that are coming in

Kind Regards

Dave

Expert:  Alex J. replied 2 years ago.
Hi
Thank you.
Does the company have any assets? Is there anyone that can replace her in making this application?
Kind regards
AJ
Customer: replied 2 years ago.

There are no assets in the business. She is willing to stay for the application because she is also applying for her own company that carries out the same practice in a different area. It's quite complicated. She would also be cutting off her nose by not carrying out the application as the business would be worthless. I think as a director and shareholder she is legally bound to pay her share of the losses

Regards

Dave

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
Directors and shareholders are not personally liable for a company's debts. A company is a distinct legal personality and therefore shareholders liability is limited to the paid up share capital.
A director can only be held liable for a company's debts in limited circumstances where for example they have taken money from it or traded the company knowing it to be insolvent.
If you do not pay the company's debts it will go into liquidation.
She needs to understand that the company can only buy her out if it has funds. Would she be willing to accept installments? If she refused to fund the company would you carry on funding it?
Kind regards
AJ
Customer: replied 2 years ago.

Hi Alex

I'm very grateful for your help. This situation has made me very ill.

The relationship has now completely broken down and she has told the other shareholder that together they can vote me off as a director but leave me as a shareholder. I might accept that offer if it comes along but I have a feeling she will close the company down and start it under another name to make my shares worthless. Could I get an agreement stopping that from happening ?

Dave

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
What percentage of the shares do you own?
Kind regards
AJ
Customer: replied 2 years ago.

33%

Customer: replied 2 years ago.

all 3 own 33%

Expert:  Alex J. replied 2 years ago.
Hi
Thank you.
Do you think the other shareholder will vote you off?
Would they be prepared to buy your shares?
If they go off and form a competing business you are free to do the so - but this would obviously end the company.
Baring this in mind what do you want to achieve? Do you want to keep the company?
Kind regards
AJ
Customer: replied 2 years ago.

Its very complicated. We are applying for registration with the care quality Commission. I have invested £25000 into the business, another partner has invested £12000 in the business. The 3rd partner brings experience to the business so was not expected to add funds. Partner number 2 has refused to carry on funding and did say she wanted to leave. She has now told the other partner that she wants to stay but get rid of me. Partner number 3 wants to keep the peace but privately says she supports me. The problem is we need partners 2 and 3 to get us through the registration.

Partner 3 is leaving the business and privately says she will give me her shares but doesn't want to upset partner no 2. Its a desperate situation !

I have offered partner number 2, £10,000 for her shares but has not replied. If I agreed to stand down I think she would change the company and cut me out leaving my shares worthless unless we have an agreement saying that cannot happen

Customer: replied 2 years ago.

For the past month she has refused to help with the wages and I have had to borrow the money to pay the staff believing that I was going to take over the business. And now she is going back on the decision. Is she legally obliged to help find half of the money to keep the business going ?

Yes I would like to keep the company

Customer: replied 2 years ago.

Hi Alex

Sorry this situation is dragging on but I have invested everything I have and a lot more in this business !

I have a thought.... the other 33% shareholder told me she wanted some office furniture etc for her shares and I gave them to her. She doesn't want to tell the other director and shareholder until we have completed our CQC Registration. When she does, I will own 66% of the business. Can I vote director no 2 off the board when the shares have been transferred ?

Expert:  Alex J. replied 2 years ago.
Hi,
My apologies I have just received this post.
The office furniture you gave to the other director - did this belong to you personally or the company? Do you have a stock transfer form for the shares?
If you have a 66% shareholding you could vote this other director off under S.168 of the Companies Act 2006. You would have to call a shareholder meeting proposing the removal on 28 days notice.
I look forward to hearing from you.
Kind regards
AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3653
Experience: Solicitors 2 years plus PQE
Alex J. and 3 other Law Specialists are ready to help you
Customer: replied 2 years ago.

Hi Alex

Yes I paid for the furniture but I don't have proof other than a text from her saying that she has accepted my offer.

I'm not actually sure that I can keep going financially, for much longer if we can't resolve the problem. Really appreciate your help.

Dave

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
Is this furniture used by the company?
Has she taken owner ship of the furniture?
Has she signed a stock transfer form?
Kind regards
AJ