Partner problem

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hikicker

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Hi, looking for a bit of advice as to what approach to take with a fellow director/shareholder...

We started a small online sales company this year which got off to a solid start and is turning over approx €3k per month with roughly 50% gross margins. Both directors took a 50% shareholding and I acted as a silent director (just a sideline for me, have a steady income from other company). The idea was to build up a few bob over the 1st 12-18 months and start taking the odd bonus/dividend and everybody is happy. We got a small business loan with an overhead facility and every thing was going along nicely until I recently found out that the loan a/c dd had bounced and we were almost €5k overdrawn. As it turns out, my fellow director has been withdrawing cash from the company visa to the tune of about 6 grand to fund his lifestyle! I feel like just resigning as a director and walking away however I'm reluctant to do so as:

1: The business has very good potential.
2: There is a personal guarantee from both directors on the business loan/overdraft.
3: Th original business concept was my idea.

I'd appreciate any advice on this (I'd really like to get rid of him from the company but dont want to get into any costly litigation) Should I just walk away from it and let him sort out the sht that he got us into??
 
It sounds to me like neither of you is blameless. I don't buy the "every thing was going along nicely until I recently found out that the loan a/c dd had bounced and we were almost €5k overdrawn" line. Did this happen overnight? When was the last board meeting convened? When were the last set of management accounts compiled and reviewed in detail?

Unfortunately as a proprietary director you cannot "just walk away from it" as there are plenty of authorities who will remind you of your obligations. I feel you have no option but to sort the business out by taking up a more active role and the price for that is the other shareholder surrenders their share of the equity, discharges the debt they have accumulated and then resigns as a director.
 
mathepac said:
It sounds to me like neither of you is blameless. I don't buy the "every thing was going along nicely until I recently found out that the loan a/c dd had bounced and we were almost €5k overdrawn" line. Did this happen overnight? When was the last board meeting convened? When were the last set of management accounts compiled and reviewed in detail?

We only started trading in June and hadn't gone through detailed accounts yet (the web admin panel shows sales figures which kept me happy - never thought this would happen to be fair). This has only come to light in the past month, admittedly I took my eye off the ball but I've taken the credit card from him and all cheques have now to be countersigned.
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Is the money he has taken from the company been put through the payroll? If not, he may be in breach of company law from the point of view of directors loans. Can anyone else flesh out what the OP's options are here if that is the case?
 
. Could you list what is loan amount/ repayment amount and lenght?
. What is visa card Limit?
. What is overdraft Limit? and balance of to-day.
. How much are personal guarantee to bank each or are they joint

.Do a spreadsheet of bank account and visa card from June to now.
.Allocate all expenses into various headings.
.Get how much other director took.

. If you know how much he took, decide is any of this wages, funds introduced, repayment of director loan etc
. Have you actually agreed a wage amount for other director.
. Balance left- Ask him how is he going to repay it.

If he has to use overdraft/credit card maybe the company has some cashflow problems or needs injection of funds from both directors.

Are all taxes up to date?
 
I know of another partnership that had this problem. What, if anything, does your partnership agreement say about this sort of thing?
What did your partner say when you confronted them?
 
papervalue said:
. Could you list what is loan amount/ repayment amount and lenght? €10k, €189 per month over 5 years
. What is visa card Limit? €6k (cleared each month via DD
. What is overdraft Limit? and balance of to-day. €3.5k (€4.6k o/d at present)
. How much are personal guarantee to bank each or are they joint:Joint guarantee for €10k business loan

.Do a spreadsheet of bank account and visa card from June to now.
.Allocate all expenses into various headings.
.Get how much other director took.

. If you know how much he took, decide is any of this wages, funds introduced, repayment of director loan etc
. Have you actually agreed a wage amount for other director.
. Balance left- Ask him how is he going to repay it.

If he has to use overdraft/credit card maybe the company has some cashflow problems or needs injection of funds from both directors.

Are all taxes up to date?
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Vat is all paid up to date, we originally agreed a small subsistance payment of €800 per month and once turnover hit €6k per month he could take a small salary. As it is an online business all transaction payments land in our a/c instantly so cashflow should never be a problem (60 days credit terms with our supplier)
 
Unfortunately as a proprietary director you cannot "just walk away from it" as there are plenty of authorities who will remind you of your obligations. I feel you have no option but to sort the business out by taking up a more active role and the price for that is the other shareholder surrenders their share of the equity, discharges the debt they have accumulated and then resigns as a director.[/quote]
 
hikicker said:
Unfortunately as a proprietary director you cannot "just walk away from it" as there are plenty of authorities who will remind you of your obligations. I feel you have no option but to sort the business out by taking up a more active role and the price for that is the other shareholder surrenders their share of the equity, discharges the debt they have accumulated and then resigns as a director.
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Thanks, I think I'll be taking your advice and insist that he resigns. Is this a straightforward process (once he agrees to it)? i.e. transfer of shares, resignation etc.
 
hikicker said:
Thanks, I think I'll be taking your advice and insist that he resigns. Is this a straightforward process (once he agrees to it)? i.e. transfer of shares, resignation etc.
Click to expand...

What if he refuses? Can you get him to repay the money over time as another option.
 
Bronte said:
What if he refuses?
Click to expand...

If he is that much of an idiot to refuse, then he should be told that the company is going to be placed into liquidation. I assume that the debts of the company are 'joint and several' and the directors call the shots as to where the company goes to now.
 
It might be worth getting advice on whether his actions are in any way criminal. If they are, tell him to resign, sign over his shares and repay the money or face charges.
 
If and when he agrees to resign and sign over his shares, how long will it take to process? I''ll most likely have to put in €5k as a director loan to get the finances back on track and I'm unwilling to do that while he is still part of the company.
 
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