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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Do you deal with very basic business legal advice? I own a

Resolved Question:

Hi, do you deal with very basic business legal advice? I own a private limited company and last year we advertised for an investor to come on board and invest in the business in return for a set share of the business. We met with the same investor on numerous occasions and he told us he wanted to come on board however he told us he was much more experienced than us in business and that in his opinion, he didn’t think the business needed a financial injection but that if we made him an equal partner share (one third of the business as there are two current share holders) he would invest up to £15,000 as and when the business needed it and that he would act as a ‘cash flow facility’ as and when we needed it. We were a little uncomfortable with this but he said it was in the best interest of the business. We didn’t action the shareholder paperwork because we hadn’t received any funds and we were uncertain about how the future would pan out. He has been semi involved (CONTINUED BELOW)
Submitted: 1 year ago.
Category: Law
Expert:  Ash replied 1 year ago.

Hello my name is ***** ***** I will help you.

Do you have any form of shareholder agreement please?
Alex

Customer: replied 1 year ago.
No, there has been no paperwork signed whatsoever. This was because we were uncomfortable with what he was proposing and didn’t appear to be delivering what the initial verbal agreement was. We have nothing on paper to confirm the shareholding.
Expert:  Ash replied 1 year ago.

Was anything in writing from him with his promises?

Customer: replied 1 year ago.
No, he responded to an advert and investment proposal which laid out the terms for the amount (it was not for an equal share holding - it was for 15% max) but we feel pretty manipulated by him and he turned out to be less than honest/straight/clean. But there was nothing in writing either way. Thanks
Expert:  Ash replied 1 year ago.

Did you hold notes of the meeting?

Customer: replied 1 year ago.
I have my own notes of the meetings but not signed by him. Everything to date has been verbal and in terms of the financial aspect, £2k of the 3-4k he invested could be traced by bank accounts etc. I am willing to repay him so thats not the point - the point is that he is saying that until he is repaid he remains a partner of the business and therefore has a right to know everything. His behaviour towards us has also been less than socially acceptable, turning up at our family home, turning up at the office, watching us go in and out of our family home from his car and repeatedly asking for updates by text message and email. Some of the content of his emails have been borderline threatening. Thanks.
Expert:  Ash replied 1 year ago.

But it was based on lies? That is why he is a shareholder?

Customer: replied 1 year ago.
His shareholding was never confirmed and he hasn't received any shares or returns as yet. He willingly withdrew from being involved when we challenged him about him wanting sole access to bank accounts and about him suggesting we do certain things that we were uncomfortable about and potentially dishonest. He said he would withdraw and was happy for us to repay the money as and when the business could but he's recently started being difficult.
Expert:  Ash replied 1 year ago.

Is he on the annual return? Did you write and formally accept?

Customer: replied 1 year ago.
No, he isn't named on any documentation and there was no formal acceptance. His name is ***** ***** on any company paperwork whatsoever.
Expert:  Ash replied 1 year ago.

Did you accept any payment and if so, when?

Customer: replied 1 year ago.
He gave us 2k for cash flow which he paid direct from his other business and he paid for some printing materials himself - it amounts to between 3-4k.
Expert:  Ash replied 1 year ago.

Was there an agreed amount to be invested?

Expert:  Ash replied 1 year ago.

If so has he paid this amount or refused? I see there is a reference to £15k

Customer: replied 1 year ago.
he said he would invest a minimum of 15k but upwards of 25k should the business need it. He just said he wasn't prepared to invest the money straight away as he 'didn't believe' that's what the business needed and instead said he would give us his 'mentoring' and release capital as and when the business needed it gradually. This totalled between 3-4K in nine months.
Expert:  Ash replied 1 year ago.

But this was never agreed in advance?

Customer: replied 1 year ago.
They were the terms of the agreement but it wasn't formalised because of our inability to pin down the agreement on paper. He responded to an investment proposal offering 5% for 7k and then met with us and at the final meeting advised he wanted to invest more but not 'immediately' despite the business desperately needing the injection. The last straw came recently when the business required a cash injection for cash flow due to growth and he attempted to secure a loan rather than invest as promised.
Customer: replied 1 year ago.
Sorry, should've made clear that he attempted to secure a loan in the business' name rather than investing his own money (which he readily has available).
Expert:  Ash replied 1 year ago.

So he hasnt stuck to his side by giving the capital injection as agreed?

Customer: replied 1 year ago.
No he hasn't. He basically wants an equal share without putting the agreed initial amount in. He wanted to 'drip feed' it in, but in the meantime he wanted a 33% share, sole access to bank accounts and full control, and also he wanted the shares in his partner's name for tax reasons which we also were not happy about. The upshot is that he Expected to exchange a 33% share for his time and actually, the more involved he tried to become, the more relationship broke down because he wanted to do things his way which wasn't always strictly legal.
Expert:  Ash replied 1 year ago.

Ok - then he is in breach of contract. You can return his funds and then say that the agreement is terminated. You had an agreement and he broke it.

Therefore on that basis alone you can end or terminate the agreement. This is a simple case of breach of contract.

He didnt pay the funds, he organised a loan - that was not the deal.

Can I clarify anything for you about this today please?
Alex

Customer: replied 1 year ago.
Thanks - as we thought. But does he have a legal claim to the business in the interim? Can he enforce his 33% share between now and when we repay him?
Expert:  Ash replied 1 year ago.

No, he is not named on the annual return. In any event you can hold an AGM to vote him out for the breach of contract.

Does that clarify? Alex

Ash and other Law Specialists are ready to help you
Customer: replied 1 year ago.
much, thank you. Excellent service.