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JGM
JGM, Solicitor
Category: Scots Law
Satisfied Customers: 10102
Experience:  30 years as a practising solicitor.
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I SET UP A SMALL BUSINESS FOR A SALARY AND A 10 PER CENT PROFIT

Customer Question

I SET UP A SMALL BUSINESS FOR A SALARY AND A 10 PER CENT PROFIT SHARE . BUSINESS WAS SLOW BUT I JUST FOUND OUT THERE WERE PROFITS OVER TWO YEARS WHEN THE OWNERS CONSTANTLY SAID THE BUSINESS WAS RUNNING AT A LOSS . ALL THE AGREEMENTS WERE VERBAL . I HAVE GOT SOMEONE ELSE WHO HEPLED SET IT UP AND SHE ALSO HAS HAD NOTHING IN THE PROFIT SHARES. CAN I TAKE THEM TO COURT IF THEY REFUSE TO GIVE ME WHAT IM DUE ?
Submitted: 3 years ago.
Category: Scots Law
Expert:  touchwoodsden replied 3 years ago.
Hello, I am Law Denning and I am a practising solicitor in a High Street practice. I have been an expert on this website in UK law since 2008. During that time, as you appreciate, I have answered thousands of questions from satisfied users on a variety of subjects. Because we are all in practice with clients and court and other users, I might not always respond in minutes, particularly evenings and weekends. Please bear with me in that case

It is my pleasure to try and assist you with this today. Please bear with me
while I gather some further information from you in order for me to be able to
advise you fully.

Unless I have all the facts that I need, my answer would not be accurate.

-Could you explain your situation a little more?
Customer: replied 3 years ago.

My sister and i were asked to set up a residential home for children in care . The couple who asked us are man and wife and had a nursery school for children.


We agreed to set up a new company for them and agreed salaries, pensions, car. pc ...all the usual things required.


More importantly, my sister and i advised them that the business that we were setting up is a specialist setting which requires a knowledge base of children in care of loc authorities in scotland.


My sister and i had all the skills required and negotiated and agreed with the couple that we would not commit to this new venture without agreement that we would both receive 10 per cent profit shares each year based on any profit accrued by the new business.


This was due to the enormous amount of working time, committment and pewrsonal time needed to ensure the safety and establishment and success of this new business . We both knew the huge amount of effort it would take to set up such a business from scratch with our intellectual knowledge, skills and experience as we had both already been empoyed in this field of work.


The business is 3 years old in Oct 2013. It has grown slowly and steadily with many children being accommodated for their loc authorities to ensure their safety and well being. Despite the recession, the business continues to accommodate children in care.


All during the previous 2 - 3 years and soon after it opened, the owners begun to pressurise us with discussions on finances being tight, and the company not being financially fruitful. This talk has continued and only last week when i asked if the company was becoming more successful financially as i wanted to discuss possible profit shares due to me, i was told that the company was not making any profit whatsoever , only just breaking even. They refused to show me the business accounts so i obtained them from the companies house records as they are public documents. The company had recorded profits of 77 k in year 1 .....167 k in year 2 ....and year3 is yet to be published although i am aware that this last year has been the busiest so far so would expect it to be a larger recorded profit than year 2. My sister left the company 6 wks ago due to constant anxieties about finances being discussed by the owners daily. Now we find that the business is profitable and indeed there ARE profits owed to us as originally agreed prior to setting the business up. Can you advise as to where we stand now . All agreements were verbal but my sister and i recorded with a lawyer at the time of the setting up of this business . I am still employed there but feel they have breached all trust and lied to us despite the business becoming successful and very established with a very good reputation despite being only a couple of years old.!!! Where do we stand in scots law,,,or is it employment law for uk ...thank you.


Expert:  touchwoodsden replied 3 years ago.
I just noticed that u r in Scotland. I will transfer to Scottish Law
Expert:  JGM replied 3 years ago.
Thank you for your question.

Do you have a shareholding in the company? Are you an employee of the company?
Customer: replied 3 years ago.

Employee

Expert:  JGM replied 3 years ago.
In that case you have two options. You can sue for breach of contract in the court. A verbal contract is not ideal but if two of you are affected then you will at least have corroboration of the verbal agreement. A verbal agreement is binding under Scots law in this type of situation.

The reason I say that you should sue in the court and not at an employments tribunal is that the agreement for a profit share may not arise from the contract of employment. In addition the courts are not subject to the same statutory limits on payment of minutes that the tribunal is subject to.

Happy to discuss further.

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