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My husband has 35% partnership in a Financial Planning business…

My husband has 35% partnership...

My husband has 35% partnership in a Financial Planning business - his partner is majority share holder. However, my husband is the main Financial Planner, thus having contact with most clients. Two other employees in office (both receiving their required salaries) - only qualified as Fin Planners two/three years ago. Prior to this they were solely administration employees and still cover the administration duties as well as some financial planning duties.

Due to his business partner operating a separate Fund Management investment company - conflict of interest issues mean he cannot operate as a financial planner in the partnership business with my husband, though the partner would be the main decision maker in the business.

Due to financial problems, the business reduced my husband's salary significantly two years ago - then thirteen months ago, his salary ceased completely.

My husband's opinion is that as he is an owner, he must be the one to make the sacrfice of receiving no reimbursement for his financial planning services. However this means, we are living purely on our retirement savings - which have been reduced to an alarming level - especially as we are both in our early sixties - and we cannot continue in the current situation for too much longer.

They are hoping to sell the business - which has been in the hands of a broker for the past month.

My question is - My husband is obviously the main principal (day to day) for client contact, the most senior financial adviser in the business and, therefore, must be of value to the business. If he decides to 'resign' his employment (unpaid), can his partner (with majority share), do anything to impact the amount payable to my husband, if a sale eventuated?

We are also aware that my husband is the main financial adviser, and in the event that he may resign to find paid work elsewhere, this could have an impact on the sale figure value of the business.

Thank you for any advice you may be able to offer.

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Answered in 28 minutes by:

4/29/2013

Solicitor: Leon, Solicitor replied 10 years ago

Leon, Solicitor

Category: Australia Law

Satisfied Customers: 52,733

Experience: BEc Dip Ed, Dip Law (SAB) MTax (UNSW)

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Good Afternoon,

Thank you for your question. To Introduce myself I am a sydney based Solicitor and will do my best to provide you with relevant information to assist you.

Is your husband a director of the company as well as a shareholder?

Did your husband agreed to the reduction and then ceasing of his income on the basis that it would be paid in the future?

Did your husband have an agreement with the company that set out what his salary would be?

Customer reply replied 10 years ago

Thank you for your prompt response. I phoned my husband - in response to your questions:-

Yes - he is a director of the company as well as shareholder.

He agreed to salary reduction/ceasing - in the hope that it would resume when circumstances improved, however no formal assurance was given that it would be reimbursed at a future date.

He recalls receiving a letter setting out salary details etc that he initially received (7 years ago when business was purchased) - he is trying to find this letter amongst his filed papers in his business office.

Solicitor: Leon, Solicitor replied 10 years ago

Good Afternoon,

The fact that he has agreed to the reduction/ceasing of his salary, is a problem. The reason I say this, is because if that is all he agreed to and not to be reimbursed what he has lost on the sale of the business, they can argue that he decided to forfeit this money.

Being a shareholder of the business, if the business is sold then he is entitled to receive his share of the proceeds based on his shareholding.

If they sell the company's shares then again the your husband would receive a share based on his shareholding.

The issue is if your husband leaves the business, and the customers follow him, then the value of the business will decrease and this will impact on what your husband receives.

If it is a requirement that he has to remain with the business, then it may be a bargaining point for him to reach an agreement where the money he has not been receiving is to be paid to him upon the sale of the business at the proceeds plus is 35% shareholding.

He also needs to be careful that he is not sued by the business if he leaves, for stealing customers and this can be seen as a breach under the corporations act.

He does have a reasonably good position to try and get his money if he's required to stay so that the business is sold.

I hope this is of assistance. If I have missed anything, or you have any further questions please let me know before leaving any feedback.

If I have assisted please do not forget to leave me with positive feedback.

Customer reply replied 10 years ago

Thank you for your 'excellent' response.

My husband, ethically, would not agree to clients being retained by him, should he leave the business. Unfortunately, it is because of his high 'ethics' that he has allowed himself to be placed in the unfortunate position he is in.

His business partner has taken advantage of my husband's 'non-confrontational' manner, and there are many other legal avenues I could raise with you at a later stage, concerning the business partner's dealings with his separate Investment company, in conjunction with the 'partnership' company.

Your advice about the possible bargaining point of recouping lost remuneration is an idea that I had also thought of and will definitely consider it further. We have more or less accepted that it is highly unlikely we will not receive the past lost salary income - but perhaps we can pursue any future income, as suggested by you - to be reimbursed once the business sale is settled.

Thank you again for your excellent advice.

Solicitor: Leon, Solicitor replied 10 years ago

Good Evening

You are welcome

Make sure any agreement that is reached is in writing so that your husband can enforce ir.

The agreement should say that any unpaid salary be paid first before any distribution to share holders.

I wish you the best of luck

I hope this is of assistance. If I have missed anything, or you have any further questions please let me know before leaving any feedback.

If I have assisted please do not forget to leave me with positive feedback.

Leon, Solicitor

Category: Australia Law

Satisfied Customers: 52,733

Experience: BEc Dip Ed, Dip Law (SAB) MTax (UNSW)

Verified

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