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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3610
Experience:  Solicitors 2 years plus PQE
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We are a small startup with 3 founders, ******* (UK) ,

Customer Question

We are a small startup with 3 founders, ******* (UK) , ******* and *******(Brazil).
1-The first problem is that ******* changed ******* equity on ******* without any signed document from us. The original equity split was ******* (60%), ******* (20%) and******* (20%) with us 3 as directors. Now he resigned me and ******* s directors and changed the equity ownership to ******* (60%), ******* (20%) and ******* (20%) without any signed documents from ourselves. I asked him to change this, but he doesn't want to. As a result of this, he has the control of the Companies House to issue shares, etc). From what I understand, this is a fraud to ******* . I have a signed shareholders agreement with him with me as major shareholder, but I don't think he could have changed this without our signed authorization. These changes can be see at
*******
2-The second problem is that because of this, he opened the bank account with only himself as an online administrator. He told me that he had added me and that my card would arrive, but it didn't happen yet. (I'm not even sure that he really did that now). As a result of this, I was using the company debit card on his name (he gave me the card and the Pin number). Everything was fine until he just blocked the card without even telling me. Then I called the bank to unblock it pretending that I was *******.
As a major Shareholder I have the right to authorise any transaction, and I have a spreadsheet record of all the transactions I did using this card.
What are my options to remove him as a founder and get back control of companies house and the bank account? Is there any legal problem by using his company debit card, even though he has authorised and gave his pin number? And how about the call to unblock the card?
Thanks,
*******
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. Do you have a share certificate for your shares? Can you send me a copy of the shareholders agreement? Does the company have any assets? Kind regards AJ
Customer: replied 1 year ago.
Hi AJ, thanks ***** do not have any share certificate, but the company was originally started with the original equity ownership in companies house.At first, the equity was arranged at a phone meeting one year ago, without any signing documents. Then we rearranged the equity in a meeting with an email (attached). Then, after the email, Edgard left the company (we are still negotiating his agreement) and I signed a separate one with Paul. (attached).The company assets are computer code, and a bank account with £10K from our first investors. We do not have any clients yet and we didn't started selling.
Customer: replied 1 year ago.
Here is the E-mail equity agreement. The Shareholder agreement is properly signed by me and Paul with a witness each.Thanks
Customer: replied 1 year ago.
Sorry, here is the correct email agreement.
Expert:  Alex J. replied 1 year ago.
Hi, Thank you I will review this and revert to you shortly. This may take me a little while so please do not be concerned if you do not hear from me right away. Just so you know you cannot transfer shares that you own without signing a form CON40G stock transfer form, effectively this individual cannot just steal your shares. Kind regards AJ
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. I have reviewed this. While I can tell you for certain you cannot take someones shares without their consent (or contractual right to do so under a shareholders agreement). The shareholders agreement talks about vesting shares, but not say how many shares will be vested over the period described. If you look at the incorporation form you had 60% of the share capital from day one - this is evident on the memorandum as well - all your colleague has done is change the annual return information without any evidence any share transfer took. The annual return is just an administrative record, your evidence of ownership still remains on the memorandum and the lack of stock transfer form. Going forward what do you want to achieve? Do you want to dissolve the company? Do you want to get the code? Who wrote the code? Kind regards AJ
Customer: replied 1 year ago.
Does that means that I still have the right for 60% from the initial incorporation? Is the vesting mechanism on the shareholders agreement not useful at all?The best goal would be to retrieve the control of the company (companies house) and the bank account and also keep the code and the branding. What would be possible ways to achieve that?
Do I need to dissolve the company and recreate?How about the directors resignation of me and Edgard, which we also didn't signed any paper, can we revert it?He created the bank account based on the wrong assumptions that he owns 60% from the annual filling, is there any problem with this?Also, is there any problem with me using the companies debit card in his name?Finally, I called the bank to unblock the debit card pretending that I was Paul. Is there any problem with this?Thanks
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. The vesting mechanism is not useful simply because it is unclear. I think it is trying to achieve the following - lets say you have 60 shares (out of 100) - the vesting mechanisim states you will get drip fed those sixty shares over a period of months? Is that what you were trying to achieve?Clearly the most valuable assets of the compant (as it has not traded) is the code. Who wrote the code?You can use the company debit card if you are a director, on the banking mandate and are spending the money in the company's best interest. Calling the bank pretending to be someone else to get it unlocked was the wrong thing to do, further action could be construed negatively. What I suggest you do is the following - write to the bank and say you are a director and shareholder if the company, you are in dispute with the other shareholder and the account must be frozen until further notice.As for your termination as a director - he had no right to do this - the record at Companies House is just an administrative record, unless you resigned or where voted out by ordinary resolution you are still a director. Write to Companies House and tell them (i) The annual return is incorrect and (ii) explain you are still a director as you have not been voted out or resigned.Moving forward, assuming you an no longer work with Paul and he will not leave voluntarily, what claim do you have to the code?
Customer: replied 1 year ago.
Thanks for the reply.Yes, the vesting mechanism is based on months. The table state that after X months, each shareholder has the right to vest X% of the shares they have the right to. According to the table, we also have a cliff mechanism. But if it is not clear, maybe it is not valid. Right?I wrote the code all by myself, and I am the only one with access to it. It was all written in my laptop. It's in my repository with contributions only from me.You say that the record at Companies House is just an administrative one, but could he face any problem by submitting wrong information to them? Without the consent and authorization from the other founders? Can I use these acts (resignation and annual filling) to try to convince him to reach an agreement?When you say further action can be constructed negatively with my call, do you mean what possible problems can I face? Is fraud by false representation criminal charge a possibility? Even though there was no losses or risk of losses involved as all the money were either for my personal salary or for company expenses and that as a majority shareholder I can authorize any company transactions.Moving forward, my main goal is to solve this problem, either by dissolving the company and recreating another one or if he leaves voluntarily first.Is there any way for me to force being added as an online administrator of the account and responsible in the bank using the incorporation documents?Thanks
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. What the mechanism does not explain is how the shares will vest? Is the company effectively issuing more shares after every month?If you wrote the code all by yourself - how has the company ended up owning it? Were you paid a salary? or had you written before the company was conceived? Under English law you are potentially the legal owner of that code - as a copyright.He could potentially be fined for deliberately making misleading filings to Companies House. It is potentially a criminal offence.
Customer: replied 1 year ago.
Is this enough to explain the vesting mechanism:
"If either Founder ceases to provide services to the company, resigns from the company, or is terminated from services with the company by a majority vote of the Founders according to their respective ownership interests, with a cause or good reason, (the “Terminated Founder”) at any time prior to the Full Vesting Date (the “Termination Date”), none of the Terminated Founder’s additional shares shall vest. ##FROM THIS POINT###The Terminated Founder’s shares remaining unvested as of the Termination Date shall be cancelled or returned to the company, and the Founder’s ownership interest shall be reduced by the amount of unvested shares so cancelled or returned."So, if the founder leaves the shares not vested should be returned to the company. So you get full shares, but if you leave you need to return the shares to the company according to the table.Regarding the code, I am not sure that the company owns it. We have no official salary, but some of our expenses were paid by Ukkobox. Most of the code were written before I signed the shareholders agreement.How about my bank call? Can it also be a criminal offence?Thanks!
Customer: replied 1 year ago.
The from this point note was made by me now, it is not on the document
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. The mechanism describes in part what will happen to the shares if a founder leaves, but it is still not entirely clear how the shares were in the first place. If the code was signed before the company was founded or even anticipated, I think you have a strong claim to take ownership of the code.In relation to the bank -this was potentially criminal act, but now you ave realised what you have you must not benefit it from it in any. The fact you did this as you were provoked by someone stealing your company, then I think it is unlikely to be a criminal offence. At this point in time, stealing your shares in the company is far more serious.
Customer: replied 1 year ago.
Great, thanks!Are these the steps I should take if I can't resolve this matters directly with Paul?1-Communicate the Bank Account to block the account sending the incorporation documents as proof of ownership? Do I need/should try to explain the unblocking call to the bank and that I was usings his debit card for company expenses, or not?2-Communicate Companies House of the misleading information and request them to get my director status back and my ownership back? Then after this, can I communicate the bank and ask them to add me as the online administrator instead of Paul?Thanks!
Customer: replied 1 year ago.
Also, if I opt to dissolve the company. How can I do it? Can I do it with 60%? And how should I proceed with the investment made?
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. 1. I would not raise the card unblocking issue to the bank, I would only raise this once it becomes issue. If you have not actually taken any company funds for anything other than to carry on the business, then it should not be an issue at this stage. If the issue does arise I would just be prepared to own up to it - denying it will make the problem worse. 2. Yes I would write to Companies House and explain the filing issues.You cannot dissolve the company without a 75% majority.What I would recommend is firstly speaking to your investors, and see if you can get them to follow you.I would then see if Paul will have a face to face (skype) conversation to resolve the issue - in the negotiation I would make clear to him that he is breach of your shareholders agreement and that you control all the company IP (i.e code).I would be most grateful if you would rate my answer - I am happy to continue with any follow up points.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3610
Experience: Solicitors 2 years plus PQE
Alex J. and other Law Specialists are ready to help you
Customer: replied 1 year ago.
Great, thanks. I still have one question. How can I possibly retrieve the ownership of the bank account? Just after Companies House?Thanks
Expert:  Alex J. replied 12 months ago.
Hi Thank you. You dont own the bank account - this belongs to the company. If you decide the company is to dissolved then the funds will have to be repaid to any creditors or distributed to the shareholders. Is it possible that Paul would buy your shares, and let you leave with the code?
Customer: replied 12 months ago.
Sorry, I expressed myself wrong. The bank account belongs to the company, I would like to ask how can I force to be added as an administrator, because I am still the major Shareholder and a director.I don't think that Paul will want to keep the company without me and the code. Also, is there any way to force a face to face meeting somehow?Thanks
Expert:  Alex J. replied 12 months ago.
Hi Thank you. If you are a director you can just write to the bank and asked to be placed on the banking mandate. The way I would force a face to face meeting is by highlighting that you believe he is in breach of the shareholders agreement, and secondly that you may consider withdrawing any rights to the code if his conduct continues - say he must contact you to arrange a meeting immediately. Kind regards AJ
Customer: replied 12 months ago.
Hi Alex, one more question on this. Is the email agreement (attached above) more valid than the incorporation documents? (which could possibly change my equity)
Expert:  Alex J. replied 12 months ago.
Hi, Thank you. The incorporation documents detail who subscribed for the shares, the email is potentially evidence of a contractual arrangement between the shareholders. The arrangements in the email then have to be acted on ie by a stock transfer form - one is not more valid per say, but unless it is proved that shares were actually transferred or issued the information at Companies House will prevail. Kind regards AJ

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