Small Business Conflict Resolution

jessiecoco

Hi Everyone, 

Not sure if anyone here can offer and advice/opinion but if so I’d be really grateful. 

I’ll try and keep as much to the point as possible. 

About 18 months ago my friend and I set up a small retail business, selling via our website, over social media and at local events. 

During this time I decided to increase my hours in my job from part to full time and unfortunately came to the conclusion that I just didn’t have much time left to put into the business. 

My friend and I spoke about this and they were happy to move forward with the business by themselves, take over the current stock etc. 

I ensured all financial info was up to date and we submitted tax returns etc. Then we discussed working out how to sort the finances. 

We both put in the same amount at the beginning and I have worked out the value of the stock based on the cost price. My friend said they would carry out a stock check to ensure my numbers matched exactly what we had and then we could arrange how to split the money in the bank and the value of the stock. 

Whilst waiting for said stock take to be carried out I randomly got notifications on my phone one evening to say all the passwords had been changed on the business bank account, email account and the website so I was unable to access any stock of financial information. 

I have had no further clarification of their intentions and I have now no clue what is happening with the money in the bank etc. 

I’m really angry and don’t know how to move forward. I desperately didn’t want this to spoil our friendship but I feel that is now unlikely. 

Can anyone offer any advice please? I’m driving myself mad with it all! 

Many thanks. 

Jeremy535897

How much is actually involved?

jessiecoco

It’s not a huge amount to be fair - £3,000

Savvy_Sue

So you know what you think the stock is worth, but perhaps your friend feels you're expecting too much given that she's invested more time than you. Obviously talking to you would have been sensible, but ...

Your only hope might be a letter: you'd hoped this wouldn't break your friendship, but blocking you from the accounts without discussing her intentions makes that difficult. You appreciate that she's invested more time than you recently,  and you'd expect that to be reflected in the final split, but you don't know what she thinks is fair in that regard, and you'd really like to hear from her.

If you want to play hardball - and you could if you think you can justify what you'd be asking for - call it a Letter before Action (google) and go to Small Claims, BUT with no written agreement on how to end the arrangement I don't know how good your chances are.

Too late now, but for the benefit of others reading, this is why we talk about setting up a proper partnership agreement, BEFORE you need it, while you are still friends, and getting proper legal advice. 

Jeremy535897

When small amounts are involved, it doesn't really matter what the formalities are. The assets will be consumed by the process of allocating them in the absence of agreement. I suggest that, in the first instance, you ask your friend why the bank account passwords etc have been changed without your consent. You have to open the dialogue. If they don't respond, your friendship is over anyway. You could also talk to the bank. If you are named as one of the bank account holders, you cannot just be locked out of it.

tacpot12

I would not read anything into the passwords having been changed until you have had a chance to speak to them. They are clearly taking over the business, and clearly you should be paid something for the stock and should receive some of the money in the bank, but how much you receive is up for negotiation as they will need some of the money that the business put aside in order for it to continue running. 

Best thing to do is to focus on ageeing a settlement that allows you to fully step back from the  business and for them to be able to concentrate on running it on their own, and not going down a legal battle route.

You have your view on the stock level, and them having changed the passwords seems to set the date for the dissolution of the partnership, so your valuation of the stock at that date is what you are negotiating about. 

jessiecoco

Many thanks for the replies. I just hate that it’s all just hanging and there’s zero communication. We had a really busy Christmas period and from then nothing has happened with the business as we’ve both been busy with our other jobs and families so I don’t feel like there has been more time invested really from either party. 

Luckily I have copies of bank statements so I know where the balance stood when we agreed that I would step back. My main concern now is how much of that money will still be there. 

I guess I will have to make contact and ask for a resolution, maybe give a time frame and see what response I get. 

Lesson learnt I suppose and time to move on. 

tightauldgit

I wouldn't panic just yet - it may just be that partner got nervous and wanted to protect themselves but obviously it's not a good sign. 

When you say 'set up a business' - do you just mean, 'started trading' rather than actually set us a company or a formal partnership? Ideally you'd have a partnership agreement which would explain what happens if one partner wants to leave but I presume you don't? 

Do you have formal accounts for your first year trading? were you profitable? did you both take wages? is your removing your investment going to damage the business?

Feels like you need to have a conversation with your partner to try to resolve it amicably.  

DullGreyGuy

What was the legal structure of your business? If a LTD or partnership what did the relevant agreement say about resolving issues or one of you leaving?

martindow

Is it a joint bank account?  If so presumably you can ask the bank for duplicate statemnts so you can at least see what is going on there.