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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3557
Experience:  Solicitors 2 years plus PQE
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I have run a small business as a sole trader years. in

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I have run a small business as a sole trader for 6 years. in September this year I sold half of my Business for £5000. My Business partner had provided Business plans and propositions to improve and expand the Business. 2 Months in, he has cost the Business more than the £5000 he has invested and today has put 2 proposals to me, 1) give him back his £5000 and he will leave or 2) close the Business with immediate effect and split the assets. I don't want to close the Business but am not in a position to return the money. In fact I think it will cost more than that to put the Business back on track. As majority shareholder of the Business, could I arrange an independent valuation and then offer him half of that?
Submitted: 1 year ago.
Category: Law
Expert:  Jo C. replied 1 year ago.
Hi.
Thank you for your question. My name is ***** ***** I will try to help with this.
This is a limited company I presume?
Customer: replied 1 year ago.
The company was incorporated on 14th September this year at my business partners recommendation.
Customer: replied 1 year ago.
Let me know if you need any more information.
Expert:  Alex J. replied 1 year ago.
Hi
Thank you for your question and welcome.
My name is***** am a company law expert and my colleague has asked me to assist you.
Do you have a shareholders agreement?
What assets does the company own? e.g goodwill, IT infrastructure, customer lists, book debts, trade mark - did you formally assign these assets to the company in exchange for shares?
Is the company making any money and does it have any creditors?
What percentage of the shares do you own?
Thank you
Kind regards
AJ
Customer: replied 1 year ago.
Hi AlexWe did put a shareholders agreement together but it was never signed as the template we were using was out of date and we didn't complete the new version.The Company prior to incorporation was very small with around 7 regular customers, IT is not applicable as we use our own laptops and the company doesn't own any. My original logo was changed on incorporation but I don't want to keep the new logo. There is equipment used for the Business but no formal transfer was assigned and no inventory was compiled. The Company is a wholesale cake making Business.The Company was making money prior to incorporation but has not made a profit since incorporation. Accounts have been kept through an online accounts package. There are no creditors.I own 51% of the shares.If it would be easier, I am happy to chat about this on the phone.ThanksKaren
Expert:  Alex J. replied 1 year ago.
Thank you.
Is the equipment the only thing you want to take from the company?
Kind regards
AJ
Customer: replied 1 year ago.
Yes it is
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
If you are still the legal owner of the equipment, have you considered just shutting the company down and starting again?
When you partner invested the money did they pay £5k for shares? Or was it a loan plus shares?
Kind regards
AJ
Customer: replied 1 year ago.
He did give me a written proposal last week offering to take over the Business, offering me £100 for my shares with a salary and £5000.00 loyalty bonus if I stayed for 6 months. He has now verbally withdrawn the offer.Kind RegardsKaren
Customer: replied 1 year ago.
The £5000 investment was just for shares.Kind RegardsKaren
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
If you do not want to close the business you could offer to buy the shares and make staged payments for them - you will pay him out over time.
The issue you have is you cannot force him to sell so you will have to agree a price with him. Is he prepared to sell or will he only sell for £5k?
You could suggest you give him £2.5k for the shares and if the company makes X amount of profit within 12 months you will pay some more?
Kind regards
AJ
Customer: replied 1 year ago.
I am happy to close the limited company and start again as a sole trader.ThanksKaren
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Do you think your partner would accept the closure of the company?
Also does your partner view the equipment as being property of the company?
Kind regards
AJ
Customer: replied 1 year ago.
He suggested either me buying him out, which I can't afford to do or closing the business. He believes the equipment is property of the company which is why I thought about getting an independent valuation of equipment and stock both use able and perishable, and offering him half of that value. Either way, I'm out of pocket. Lesson learned I feel .
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Did you ever agree to transfer the property to him personally?
If you can get him out of the company and own the company yourself, this will be cheaper and involve less administration.
He has offered to leave - why dont you make him offer and start the negotiation?
Kind regards
AJ
Customer: replied 1 year ago.
Hi thereI did not agree to transfer property. I think I would rather shut the limited company but continue as a sole trader. He has been in this afternoon and threatened to sue me when I explained I was taking legal advice so the less contact we have the better.Kind RegardsKaren
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
On what grounds has he threatened to sue you?
Can you prove ownership of all the plant and machinery you want to take away?
Kind regards
AJ
Customer: replied 1 year ago.
MorningI'm not sure on what grounds he wants to sue me to be honest.I have personal receipts for most of the equipment and my other half has personal receipts for the rest. Nothing was actually purchased in the company name.Kind RegardsKaren
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
I think that is the point, he does not have any grounds to sue you.
The ideal way for you to resolve this is to close the company and take back your equipment. He will argue that your equipment for the price you paid for your shares, and the £5k was the price he paid.
If he is not prepared to negotiate with you, you will need to send him a letter (ideally a solicitors letter) detailing your intentions. It will then be up to him to determine what action he wants to take next.
How much was the equipment? Less than £5k?
Kind regards
AJ
Customer: replied 1 year ago.
HiThe total outlay for equipment was around £1500. I have had a valuation this morning of £700.I will arrange to send him a letter this week.Thank you for your help, I will make sure I don't make this mistake again!Kind RegardsKaren
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Even if for arguments sake the equipment belonged to the company he would get his money back any way.
Bare in mind it is your responsibility to pay him back. If he agrees you can close the company, if does not then you should leave and resign as a director and take your equipment.
Also consider the possibility would he buy your shares?
Kind regards
AJ
Customer: replied 1 year ago.
HiI'm not sure I understand, he has - in 2 months - cost the business more than he generated.He gave me the choice to close the Company , so I don't think that will be an issue.He did offer to buy me out, then changed his mind.Kind RegardsKaren
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. ***** would go along then with his agreement to close the company. You can then have an argument over who actually owns the equipment when that issue arises. I would just make sure you take possession of it as soon as the company closes, if your intention is to claim ownership of it. Kind regards AJ
Alex J., Solicitor
Category: Law
Satisfied Customers: 3557
Experience: Solicitors 2 years plus PQE
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