Hi there, thank you for taking the time to look at my query, I'm hoping you can help My problem in a nutshell:
I set up a business with a friend / business partner in 2010. We are currently 50/50 partners, but he believes that the time & effort he is putting into the business is greater than mine, and would like me to give him a large portion of my shares. There is no share agreement beyond the standard ones supplied for Companies House
- - The Business takes about £70k P.A. as of 2015
- - My partner is paid for his time and effort as a portion of our sales, 25% which equates to £16k / year
- - I have offered several times to increase this but he would prefer a higher proportion of shares
- - We are each owed dividends from the previous year's accounts, totalling more than the value of cash currently held in the company
- - The business is a limited company, we each own 50 shares in the company, my partner's are all unpaid shares, I own 1 paid share and 49 unpaid shares
I would like some advice as to possible ways forward. I don't view gifting my shares to my partner as an option, as I started the business and have been involved throughout, even if my capacity has not been the same as his, I feel manipulated into this position as he could have made it clear before buying in. However if I'm wrong on this please tell me!
Does my partner have a legal claim to my shares if he feels I am not putting in the same time or effort?
What protection do either of us have?
Can my partner force me in any way to give up some of my shares?
My current view is that if we are not able to negotiate a compromise, one of us can buy the other out, or we can dissolve the company.
Story in more detail:
- - I came up with a business idea while at University, wrote a business plan, spoke to a friend (P) and he jumped aboard: we agreed a 50/50 share split, he couldn't afford to pay me shares so I provided the seed money then went on a business incubation course that was provided with a grant by my University
- - Business starts, it's a slow grower, so we both take full-time jobs, our roles evolving I continue full-time work, changing roles to learn skills more relevant to the business, while P is able to scale back his work and dedicate more time to the business, eventually going full-time on the business. I am immensely proud that we have created something that managed to support one person fully, but it cannot support both of us, so I continue to work full-time while doing evenings, weekends, lunch-times etc on the business
- - In 2014 P is able to pay me for the 50 shares agreed. I sell them to him at the rate agreed originally (£1,500) - he was relatively annoyed that he had to pay for them at this point, and raised concerns, but we continued
- - P continues to be paid a salary, while I forfeit any income from the business, including dividends, to help keep the business in best financial shape while I am working
- - I discussed raising P's salary to make him more comfortable, along with how best I can be evolving my role now that we've reached the next stage of business (trying to expand our customer base). I email him several times to this effect but it is ignored
- - P contacts me to say he feels he is spending more time & effort on the business than I am able to and that he should own more shares
- - We argue over shares, over the fact that I spend less time and that P does not feel valued. I believe that salary should be reflecting time, but am open to selling some of my shares to P
- - I suspect P is not willing to even discuss buying any of my shares and believes that he is owed them, as he has threatened to walk away should we not reach an agreement that suits him
Thank you for your time reading my essay! Please let me know if you require any further information I look forward to hearing from you, Adam***@******.*** 0790(###) ###-####/span>