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My business partner says that either I take on a loan from m…

Customer Question
My business partner says...

My business partner says that either I take on a loan from him to purchase his share or he will fold the business I have 20% share

Lawyer's Assistant: OK. The Corporate Lawyer will need to help you with this. Have you consulted a lawyer yet?

No but I think that I should these are very crafty business men and I have never owned a business before

Lawyer's Assistant: Please tell me everything you can about this issue so the Corporate Lawyer can help you best. Is there anything else important you think the Corporate Lawyer should know?

They have been putting money into the business when needed, but have now taken that all back, leaving the business in debt to HMRC which they say I must take and still wanting £30,000 from me

Submitted: 2 years ago.Category: UK Law
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Answered in 47 minutes by:
3/1/2016
Solicitor: Alex J., Litigator replied 2 years ago
Alex J.
Alex J., Litigator
Category: UK Law
Satisfied Customers: 3,882
Experience: LLB, LPC, DELF
Verified

Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Is the business currently insolvent? Does it have any assets - if so what will happen to the assets when it folds? Do you have a shareholders agreement?

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Customer reply replied 2 years ago
Not insolvent
Has office equipment as assets
I have a contract showing I own 20%
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. Does it not have good will or a trading name etc? If the company did close would you start a new company? Kind regards AJ

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Customer reply replied 2 years ago
No I would just find a new job
We a running at a small loss
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. The main risk you face now is if the company is still trading while you know it is insolvent. If the company does trade while you know it is insolvent and you are a director of the company potentially you could be liable to contribute to the assets of the company personally. DO you actually want the company to keep trading?

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Customer reply replied 2 years ago
with me running it
it is not yet insolvent
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. Would you be prepared to accept responsibility for the VAT invoice if you owned the whole company?

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Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. Have you proposed he transfers the shares to you at par/nominal value and in return you will take responsibility for dealing with HMRC and the company VAT liability?

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Customer reply replied 2 years ago
but he is asking too much money as he has taken out all his investment said it was a loan
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. You cannot force him to sell his shares - if removing his "loan" from the company makes the company worthless then it seems pointless paying him money for the shares. Is there any possibility that you can get him to accept an independent valuation for the shares?

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Customer reply replied 2 years ago
I believe that this should be the way forward
I would like to run the company and take on the debt
I believe this should be enough
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. Why don't you propose allowing the company accountant to independently value it, and both commit to accepting the valuation?

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Customer reply replied 2 years ago
Ok only the accountant is a friend of the director
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. You can use any accountant that would be prepared to do it. For the process to work you would need an independent valuation. Would you be prepared to pay anything for the shares or is it not worth it? Kind regards AJ

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Customer reply replied 2 years ago
I don't feel that it's worth it as I've put all the work into it
Solicitor: Alex J., Litigator replied 2 years ago

Hi, Thank you. I would then just get as much information as you can about the business and leave - make sure you have the accounts information so you can answer any questions if the company goes into liquidation. Ultimately you do not want to be in a position where you have to accept personal liability for the company debts. Are you a director of the company?

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Customer reply replied 2 years ago
I am
Solicitor: Alex J., Litigator replied 2 years ago

Hi thank you. The risk you face is incurring personal liability under the Insolvency Act. I suspect if the company goes into liquidation the HMRC and the liquidator will want to know why this individual withdrew £30k. Can you keep copies of the accounts to show you did not touch this money?

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