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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3653
Experience:  Solicitors 2 years plus PQE
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HelloI am a 50% shareholder of a business with another

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Hello
I am a 50% shareholder of a business with another 50% shareholder, who is also the sole director.
We have no shareholder agreements or any other agreements at all.
I have collected dividends and I am registered with HMRC for the minimum amount before tax is payable.
The company sells insurance policies as a brokers, to retail customers. The company benefits from commission from the life assurance providers when policies are sold.
I had sold policies to customers through the company. The company therefore received commission and I therefore had the commission sent to my personal bank account as a commission from the company.
Some clients cancelled policies of which the company have had to pay the commission back to the insurance companies. The ltd company is now asking me to repay this debt, which amounts to 48k.
I have said that I am not liable, as I have no contract. The director however is saying that I do owe this and that this money is over the dividend and hmrc payments that I am entitled to.
He also states that If I don't pay this, that he will add the 48k to the next ltd Co annual accounts as a loan to me.
Can you help me here?
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
When you were paid this was it paid as a commission? or as a dividend?
Kind regards
AJ
Customer: replied 1 year ago.

That's a good point. I have always had authority to use the bank account for the last 3 years, so I just paid myself and recorded the payments on a weekly commission statement on the pc. As I paid myself as soon as the company received the commission, I would assume this was paid to me as commission, as if it was a dividend, we would have to both agree this and pay equal amounts to each other wouldn't we?

Expert:  Alex J. replied 1 year ago.
Hi
Thank you.
The difference is a dividend would have to have been declared and then approved by dividend.
A commission is a right to be paid for introducing business. It would have to have been pre agreed that commissions could be clawed back. Were your business partners commissions clawed back?
Kind regards
AJ
Customer: replied 1 year ago.
I do not have a contract with the company to state that if policies lapse, that I have to pay back any clawbacks.
Yes, on occasion we both used to offset our clawbacks against new commissions fpr new policies,as and business.
My business partner as as a director would offset new commissions against his own clawbacks.
Expert:  Alex J. replied 1 year ago.
Hi
Thank you.
The other director cannot force you to become a debtor of the company. However he does have some grounds to argue that the commissions should be clawed back if that was common practice.
Can the company financially survive without the claw back? Is it possible that you could agree to offset the clawback against future commissions?
Kind regards
AJ
Customer: replied 1 year ago.

The company has 8 self employed brokers. The company makes a profit from them, so you could say yes, that the profits from this side of the business can offset any clawbacks from my clients.

I am no longer at the company as I fell out with the director. I still have my 50% shareholding though. As such, he never sent me a termination letter, but he did cancel all of my agencies with the insurance companies. Since this time, my policies have cancelled and he is demanding the money. He also says that 12 months ago, I had in the region of 25k of policy cancellations that I didn't pay back and he is asking for this back too. The company profits offset this at that time.

Expert:  Alex J. replied 1 year ago.
Hi
Thank you.
When you left did you agree any settlement?
Would you have offset those commissions had you been there? Has he even provided you with proof?
Kind regards
AJ
Customer: replied 1 year ago.

No, we never agreed any settlement and I have always maintained that I am not liable for this.

If I was still there, I may have paid some money into the business's to support this debt or maybe not. That would have been my decision and just an injection of capital as a shareholder. A lot of the time, company profits would pay for any clawbacks. I assume that as the clawback figure is quite high, the company cannot afford to offset this. Where as. If it had been a lot smaller, it would.

The only proof he has given me is to show me the clawback statements from the insurance companies showing that particular named clients had cancelled. Therefore it is obvious that I was the one who set these up, however I don't believe I have a responsibility to pay them back. I have no shareholder agreement or contract to state otherwise. What is your advice so far?

Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
If it was not normal policy for you to pay the claw backs out of your own pocket, then this individual cannot then suddenly decide that you should pay or that you should become a debtor of the company.
In order to decide what to do next, what do you want to do going forward? Do you want to keep your shares or sell them?
Kind regards
AJ
Customer: replied 1 year ago.

You have been very useful in answering my questions. Thank you very much. We can close this discussion now.

Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
If you would rate my answer I would be most grateful.
If I can assist any further please do not hesitate to contact me.
Kind regards
AJ
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