how to get money out of company?

catandy

sorry if this is posted in the wrong place but I didn't know where else to put it.

I'm basically after some advise on if it is possible to force repayment of money I have pumped into starting up a business - sounds very confrontational and it feels like that but I'm totally at my wits end and don't know what else to do.

My ex and I set up a business 3 years ago as an informal partnership, it was software development and design - I was the ideas person and marketing/ sales, ex was the techie. Ex pumped 6.5k into it to get the venture up and running...

and 3 years later we finally have a fully completed software suite being used by 2 main contracts both of whom are upping production which is good because we make a minimum of 19% profit on all business generated - so far so good. The 3 years have been costly to me (just short of 33K in total) - which also goes some way to explaining why my personal finances are such a mess..

Company is making enough each month to pay ex a salary plus cover all running costs. Ex now wants to relocate company to south coast (he has family down there) I live in the midlands and am settled here as are my kids. if he moved and we ran it remotely I would have less day to day control (I work full time) and the money needing to be taken out of the company would go up considerably (I currently subsidise his living arrangements and pay some bills for his daughter) this would all have to come out of his money so a higher salary/ takings... basically if he does move it I will have to trust that he continues running it to be profitable because at the moment me and my investment are bottom of the heap priorities wise.

Is there a way of me putting the obligation onto him/ forcing him to

a/ continue trading in the best interest of the company
b/ pay me back my investment over an agreed timescale
c/ not do anything to 'hurt' the company and cause it to go bump - it sounds childish but I know him, if he doesn't get his way I wouldn't put it past him to just grind it into the floor and then its all finished anyway
d/ worst case scenario can I make him stand down as a director and run it myself? this would be just till he had worked out that this can be run remotely and we both need to be getting some money out of this company

sorry for the long post - my mind is whirring with all of this.

colino

If you are so distrustful, I really hope you have some, even basic, partnership agreement in place. Otherwise I think your best option is to buy him out because working together for your mutual benefit doesn't sound like a realistic option.

Annisele

You talk about an "informal partnership" and about standing down as a director.

Can you just confirm the legal status of the business? Is it a limited company with you both as shareholders and directors? A partnership, with filed partnership tax returns? One of you is registered as a sole trader and employs the other?

And were you married to your ex?

catandy

its now a ltd company with us as equal partners has been for just short of 12 months

and only distrustful as far as I always come out bottom of the heap - a company lease car for him comes above me getting some funds out of the company in terms of his priorities so yes I am a bit peeved tbh

Annisele

OK, so a limited company with you both as directors and both as 50% shareholders.

Sorry to be asking my questions piecemeal, but how did your £33k go into the company? Was it a formally documented loan? Did you use it to buy shares?

To give you a few answers:

catandy wrote: »

Is there a way of me putting the obligation onto him/ forcing him to

a/ continue trading in the best interest of the company
No - you can't force anyone to work if they don't to. (It's not a huge step from that to slavery...) If he has an employment contract / service contract with the company, you might be able to get him to pay the company damages if he fails to fulfil it - but that would be pointless if he doesn't actually have any money.

b/ pay me back my investment over an agreed timescale
Don't know - depends in part on whether your "investment" is technically a loan to the company, a payment for shares, cash in his pocket to cover living expenses, or something else.

c/ not do anything to 'hurt' the company and cause it to go bump - it sounds childish but I know him, if he doesn't get his way I wouldn't put it past him to just grind it into the floor and then its all finished anyway
You certainly can't force him not to do anything to hurt the company. You might be able to get him to pay damages afterwards - depending on exactly what it is he does - but again, if he doesn't have any money that's pretty pointless

d/ worst case scenario can I make him stand down as a director and run it myself? this would be just till he had worked out that this can be run remotely and we both need to be getting some money out of this company
If you're both 50% shareholders probably not. But if he's the developer, I suspect it's easier for him to find someone to replace you than the other way round - so if you go that route you might end up being forced out yourself

Are either of you in a position to buy the other out? Is the company actually worth more than its debts?

paddyrg

One of you needs to buy the other out, then from a position of absolute power sort out the spending habits. At the moment he has no incentive to change the status quo, he's got subsidised rent and a free car and as a 50% stakeholder you can't really do a heap about it.

This is why dictatorships work, one absolute boss, clear whose rules apply.

If you are subsidising his rent or not getting benefit from company assets such as the car, how about agreeing a stock dilution to create some more shares to pay you at the equivalent rate as you subsidise his life? Soon you'll be the majority shareholder and can start kicking the company into shape, get a new developer in on low wage plus equity, hedge your bets.

As it is, if you're subsidising him, is the company actually worth anything at all? Do you really want 50% of a loss? Could you liquidate the company and sell the assets and contracts half each, with all the appropriate cross licencing, then work closely with your client and a new dev to build on your half of the forked product?

catandy

company has just made £109 in 2 hours trading with one user live - full production from the 2 contracts I've bought on board give us 4 to 6 users a night for 2 or 3 hour shift each and 4 nights a week ... which we were doing until we upped our servers.

running costs are a couple of servers in Russia so dirt cheap @ £300 pm total

I subsidise his living expenses and pay his daughters bills cos he didn't have a bank account for ages (had a joint one with his ex wife then split up and never got round to opening one for ages cos I paid all the bills) and yes I do have mug tattoed across my forehead. I pay his daughters bills cos I feel guilty shes a struggling single mom and I was there years ago ... if/ when he moves and we become independent the idea was we both took a smallish wage from the company, enough for us to live on and get the company secure then look at repaying ourselves - this has all changed with the idea of the move cross country

In reality without me asking what he has done each day he could quite easily do nothing!

yes hes a good developer, hes got the technical part of it inside out but hes got no man management or people skills or idea how to sell the damn product or get it to market which is where I came in or even an inkling of the features that people would need on the software - yes he can build it but he needs to be told exactly what to build - it needs to work like this... He also didn't have the money to support himself whilst he was developing it

the money put into the company by both of us was a loan for start up and development costs. truth be told there should be enough there for us both to be able to take a decent living wage plus be able to advertise for new customers and recoup some of our money but to get that I need to be watching over it - so I make sure it happens

the option of buying him out from my side is not really there - as you can see im financially in a right mess bought about by a combination of pumping money into this and my freelance work drying up to nothing. he couldn't buy me out or he could but he would take the money out of the company to pay me with!

sorry im not really getting anywhere - will have to mull it over some more me thinks

thanks for all your input so far its given me lots to think on

paddyrg

Can you look at taking the money equivalent to his car and rent etc out of the company in a loan to buy him out and leave him as an employee with some shares - doesn't sound like he's a particularly useful director and this stalemate won't work for either party. Actually it's working nicely for him whilst you subsidise his rent, car and daughter, but that has to stop right away. From how you described him, he's into detail and doing what he's told, that's not a director, it's a footsoldier.

There are a lot of good developers out there. Are you actually able to discern who is and isn't one? The company is completely exposed relying on the contents of one man's head, that's not an economy you should be comfortable with. Get another dev involved, even if on a review and retainer basis. Someone to step in when your ex goes on holiday/gets ill/gets bored. You might find the app isn't as good as you think, poor coding discipline, no version and chose configuration tools, no comments, magic numbers, etc.

I once (back in my IT days) took a 3 week contract to look at a system which had cost the company £1M for a particular cost estimation platform. The contact was 3 weeks as that was how long the company could still afford to trade as this system had problems, I was a member of a 2.5 man rescue team, kill or cure. We cured. We got the company short term trading and reverse engineered their £1M application which was causing problems - it was in a dreadful state. It used nested loops inside out meaning every trade they ran through it took 3+ hours to do a few moments work. The interface had logic problems and landmines. The distributed model was kinda cool but completely unsuitable and actually dangerous in this case. The developers had even written their own data access components which just encapsulated old and inefficient ones introducing problems and locking the company on unmaintained versions of libraries. Total disaster, but to the untrained eye it was good, they were a good software house, but it nearly killed the client company. We got them out of the 3 weeks, I stayed for another 6 months until I could find a permanent replacement (an excellent engineer who wanted something closer to home) and they're still running now buying up competitors and employing dozens. Whoopee for me, but fact is they thought they had good developers which led them to near bankruptcy. Get a code review.

If you can't buy out (and it's clear this needs to become an employer/employee relationship) then split the company. Your attachment to this guy is personal, this is business. Close the company and buy the codebase and contracts into a new one. Or split the company with your ex keeping the current one but you starting with the copy of the systems and a new developer. Clients will come to you if you can manage the business, not someone who can't. Maybe he'll find a replacement mother, maybe not, but if he's your ex it's rather his problem not yours.

This is all soluble in business terms, but can't stay personal which is how it presents at the moment. If it stays personal you'll keep on subsidising him and his life and family and be a martyr to that. Set both of you fully free.

Atidi

catandy wrote: »

sorry if this is posted in the wrong place but I didn't know where else to put it.

I'm basically after some advise on if it is possible to force repayment of money I have pumped into starting up a business - sounds very confrontational and it feels like that but I'm totally at my wits end and don't know what else to do.

My ex and I set up a business 3 years ago as an informal partnership, it was software development and design - I was the ideas person and marketing/ sales, ex was the techie. Ex pumped 6.5k into it to get the venture up and running...

and 3 years later we finally have a fully completed software suite being used by 2 main contracts both of whom are upping production which is good because we make a minimum of 19% profit on all business generated - so far so good. The 3 years have been costly to me (just short of 33K in total) - which also goes some way to explaining why my personal finances are such a mess..

Company is making enough each month to pay ex a salary plus cover all running costs. Ex now wants to relocate company to south coast (he has family down there) I live in the midlands and am settled here as are my kids. if he moved and we ran it remotely I would have less day to day control (I work full time) and the money needing to be taken out of the company would go up considerably (I currently subsidise his living arrangements and pay some bills for his daughter) this would all have to come out of his money so a higher salary/ takings... basically if he does move it I will have to trust that he continues running it to be profitable because at the moment me and my investment are bottom of the heap priorities wise.

Is there a way of me putting the obligation onto him/ forcing him to

a/ continue trading in the best interest of the company
b/ pay me back my investment over an agreed timescale
c/ not do anything to 'hurt' the company and cause it to go bump - it sounds childish but I know him, if he doesn't get his way I wouldn't put it past him to just grind it into the floor and then its all finished anyway
d/ worst case scenario can I make him stand down as a director and run it myself? this would be just till he had worked out that this can be run remotely and we both need to be getting some money out of this company

sorry for the long post - my mind is whirring with all of this.

catandy wrote: »

its now a ltd company with us as equal partners has been for just short of 12 months

and only distrustful as far as I always come out bottom of the heap - a company lease car for him comes above me getting some funds out of the company in terms of his priorities so yes I am a bit peeved tbh

In answer to your lettered questions:

a) Any/all directors have a responsibility to their shareholders to continue to trade in the best interests of the company and its shareholders. Whether or not his take on what the best interests are are aligned with yours is of course another question (but also see answer (c) below)
b) No, not unless there was some agreement you put in place before you invested into the informal partnership that otherwise allowed for it.
The fact that the informal partnership now seems to have been dissolved and a limited company set up complicates matters further.
c) No (but see answer (a) above). But as you are presumably an equal shareholder, and hopefully a director of the limited company too, you should be in a position to veto anything your ex attempts to change that you don't agree with.
d) No.

catandy

thank you all for your posts/ insight/ fresh perspective.

yes something needs to change - time for us both to sit down and find a way out of this mess.

many thanks