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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3522
Experience:  Solicitors 2 years plus PQE
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I own a recruitment agency with a business partner, he own

Customer Question

I own a recruitment agency with a business partner, he own 65% and I own the remaining 35%.
We started just over 2 years ago, and we came to a verbal agreement that we would pay ourselves the same basic salary but we would pay ourselves commission via dividends which would be purely based on the profit we each brought in.
I have today discovered that, for the past 3 - 4 months at least, he has been paying himself approximately £3,000 - £4,000 per month extra.
As this was a verbal agreement, I am not too sure where I stand with this matter.
Any advise would be appreciated.
Many thanks
Mark Stanley
Submitted: 9 months ago.
Category: Law
Expert:  Ben Jones replied 9 months ago.
Hello, my name is***** am a qualified lawyer and it is my pleasure to assist you with your question today. How is the agency owned - is it a partnership?
Customer: replied 9 months ago.
It is a Ltd company
Expert:  Alex J. replied 9 months ago.
Hi Thank you for your question and welcome. My name is ***** ***** my colleague has asked me to assist you. Is the money paid as salary or dividends? Kind regards AJ
Customer: replied 9 months ago.
Hi, we are a ltd company and we pay ourselves a low basic salary, and the commission (which is where the issue is) is paid via dividends
Expert:  Alex J. replied 9 months ago.
Hi, Thank you. Do you have a shareholders agreement? Are the dividends proposed at directors meeting and formally voted on in a shareholder resolution? How much have you been underpaid by? Kind regards AJ
Customer: replied 9 months ago.
Hi unfortunately as we are a small company, we do not have a shareholders agreement in place, also dividends are not voted on, what happened last year is that he took his dividends around £50k and I am still to receive mine, as he is responsible for our accounts, the dividends we pay ourselves on a monthly basis is supposed to be a percentage of how much profit we make individually, ie, if I bring into the business £15k in a month I'm entitled to 15% of that paid through dividends.It is this figure that he has been hiding from me, and today I found out that what he has been bringing into the business doesn't compare to what he has been paying himself.I hope this makes sense!
Expert:  Alex J. replied 9 months ago.
Hi Thank you. You have various options available to you, before I summarise can you confirm what you want to achieve going forward? Do you still want to work with this person or do you want to leave the company? I will prepare a response - this may take me a little while so please do not be concerned if you do not hear from me right away - I will post it by tomorrow morning.Kind regards AJ
Customer: replied 9 months ago.
Hello,Many thanks for everything thus far. I do not feel that our business relationship is sustainable any longer and my initial response is that I would like to cease working with him.I would only do this if this is a viable option financially (basically, does he owe me money, or can I sell my shares etc). As I have a family, being unemployed is not an option, and I would probably start another company in a new name etc.. But without funding this would be difficult.Many thanksMark Stanley
Expert:  Alex J. replied 9 months ago.
Thank you very much. I will prepare a response with this as an option. Kind regards ***** *****
Alex J., Solicitor
Category: Law
Satisfied Customers: 3522
Experience: Solicitors 2 years plus PQE
Alex J. and other Law Specialists are ready to help you
Customer: replied 9 months ago.
Thank you AJ
Expert:  Alex J. replied 9 months ago.
Hi, Thank you. My apologies for the delay - this question disappeared from my outstanding list. I am finishing my response now and will post it shortly. Kind regards AJ
Customer: replied 9 months ago.
Perfect, thank you AJ
Expert:  Alex J. replied 9 months ago.
Hi, Thank you. Your options that can be achieved by agreement are really as follows:(i) You purchase the company from your partner;(ii) Your partner purchases your shares from you;(iii) You liquidate the company sell its assets and go your separate ways.Options (i) and (ii) require agreement from both of you - you could negotiate with your business partner and ask her to agree to appoint a third party to value the company (taking into account the under payment made to you) and commit to one of your selling your shares to the other are the valued price. This valuer could be the company account for example.Option (iii) can be done by agreement or you can apply to court ordering that the company be liquidated as it is a partnership asset, and your partnership has broken down. If you wanted to remain in the company you could explore other more technical causes of action for example:(i) Suing the company for unpaid commissions;(ii) Suing your business partner for breach of her director duties under S.172-177 of the Companies Act 2006 - by not properly declaring a dividend she is not acting in the best interests of the shareholders;(iii) As a very last resort you can apply for protection against unfair prejudice as a minority shareholder under S.994 of the Companies Act 2006. You can apply for the court to order she return the value she has taken from the company or buys your shares at a fair price?Before deciding on a course of action, consider some initial practical steps - do you have access to the company accounts to prove she has taken more money than you? Are you in a dialogue? Is she aware of your complaint?I look forward to hearing from you. Kind regards AJ
Customer: replied 9 months ago.
Hi AJ, thanks for your response, just a quick question, if I went down the liquidation route, would he have to repay the money he's taken out of the business first and then all assets split 35/65?Ion have access to all the business accounts and I have already backed them up.We are in dialogue, however he is not aware of this complaint, he has worked very hard to try and hide it all from me.
Expert:  Alex J. replied 9 months ago.
Hi, Thank you. If the money was not properly paid as either a commission, salary or dividend, then yes he would potentially be forced to repay it. I think before he realises you are about to dispute matters, make sure you get copies of as many relevant documents as you can (bank statements emails etc). If you sued him or raised the dispute he will likely stop you accessing any sensitive information going forward.

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