question regarding joint directorship - Business Forum UK

WFgb · 08-01-10, 01:06 AM

Hi all!

This is my first post.

I have a question regarding my Business.

Basically, i am joint owner/director of a small business. When we first took over, i was the only one who invested any money, my business partner was unable to do so at the time, so we took out a bank loan to cover his half under the understanding that he would raise the funds in the future.

At the time this was fine, but as time has passed it is becoming more obvious that he is either unable or unwilling to invest any money. He also does not seem to be taking much of an active interet in the business, treating it more like a job than a business, if that makes sense. All of the administrative duties are left to me. If there are any calls about finances or rent, I am the one who deals with it.

We are suffering from severe financial difficulties at the moment, so i am considering taking a full time job to supliment my income, allowing me to look after my family (including child who is due march) and invest into my business wherever possible.

My question is this (thank you for baring with me)

I would like to remove my partner as Director, giving him a managerial role within the company, rather than ownership. I would then like to change from a partnership to sole trader, so that all investment is mine and mine alone (unless anyone else wants to invest etc)

What legal boundaries are there to this? Am i within my rights to do so? Technically he has no grounds for ownership other than being a director. The loan belongs to the business, not him or i, the business as a whole. So i cannot see any grounds for me to not be able to do this.

Basically i would just like some advice on this matter

Thanks in advance!

Travis

consultant · 08-01-10, 02:53 PM

Director does not equal ownership.

Shares = ownership.
Director = responsibility & accountability

WFgb · 08-01-10, 04:32 PM

Ok thats good to know.
As you may have guessed i am a complete newbie to the business world.

So basically then it is down to shares. I am the majority shareholder (there are only 3 shares, of which i own 2) Does that then mean i would be able to do what i am thinking of doing?

Thanks for the help so far

Indizine · 08-01-10, 04:34 PM

what does your shareholder agreement say you can do?

WFgb · 08-01-10, 05:39 PM

To be completely honest, we didnt decide on any agreements when we went into business with eachother.

Bit of back history may be needed.

This opportunity was literally chucked on our laps, it was an offer which was too good to refuse, generally because the previous owner was going through a rough personal patch and needed to get shot of the business, so we went into it feet first, without really thinking about it or getting advice.

There are issues arising from this which are seperate so i wont go into it now, suffice to say that i have learned my lesson from this and will not go into anything like this blind in future.

So yeah, we have not made any shareholder agreements, or director role agreements (another issue...) for that matter. So everything is taken on an 'as is' basis.

The thing i do not want to do is alienate my business partner. I know it may not sound like i care much about that, but given what i am needing to do, i dont think it is fair to invest any more of my own money into a business which is a joint effort, where only one has actually invested, so to speak.

Hope that makes sense?

Indizine · 08-01-10, 05:44 PM

I'm not as aufe with shares as Ive never had to share any, but if there is no agreement then the default will apply, whatever that is. I'm sure someone will be along soon to clarify but if in doubt look it up on the Companies House website.

WFgb · 08-01-10, 05:46 PM

Ok cool, well that gives me some Google fodder!

Thanks for the advice so far!

consultant · 08-01-10, 07:51 PM

do they have the other share?

Paul Norman · 09-01-10, 09:56 AM

As always, the first step is to sit down and discuss this openly with your colleague. Their responses will to a large extent determine what to do next. They may open up to you and be helpful. Or they may not.

First step here is to try to negotiate a solution. You could buy them out. Which, if the business has no value, will just be about buying their shares.

WFgb · 09-01-10, 03:38 PM

Consultant - Yes he does own the other share.

Paul - Yeah i was planning on having a chat with him about it. Was going to discuss where we are and where we need to be going etc, give him a time limit to find some money to invest if he wants to etc.

At the end of the day, i dont want to drive a wedge between us, as we were friends before we went into this so i would like us to be friends on the other side.

As for the value of the share's, they hold a value of £1 each. It was somethig put in place just because it was a requirement. The old management set it up.

Thanks for the replies so far. Think i need to just sit down and chat with him before investigating any further options.