Business partners not buying me out of the business.

[Suzysues]

Hello everyone,

I hope you can advise me on an issue.

Three years ago I went into business with a husband and wife couple who I had known for a long time and considered friends. The business is a thriving barber's shop and barbering teaching academy.
The following is the wording (minus any sensitive data) from the contract that we all agreed to and signed:

'This email outlines the agreement for 20% of the Academy profits commencing 1st Feb 2021.

1. The Academy's turnover will account for the costs prior to paying any shareholders - as requested you can be paid quarterly with a full statement.

2. The costs will include, 50% of the annual rent at the XXX Lane shop, corporation tax deduction 20% or the relevant % for that year, any utilities, marketing costs, and any other agreed costs.

3. In return for 20% we will require payment of £12,000 but you will pay this off as and when we earn as agreed.

4. You will be required to work at all Academy sessions, unless unwell or on an agreed holiday.

5. You will help with finding new barbers for XXXX Barbershops.

6. You will work closely with XXX and XXX to maximise the earning potential.
7. You will be as active on social media as possible, promoting the school of barbering.

8. You will attend regular meetings.

9. You will allow XXX Barbershop Ltd to purchase back the 20% of the Academy for the same price paid £12,000 if you no longer wish to be part of the team. However we expect a minimum of commitment of 24 months before we would consider this as an option’.

If you email me back to agree but also let me know if you want to add?'

This was sent by the wife of the couple I went into business with.

Three years later I decided to leave and pursue working elsewhere.

Before I left it was agreed (verbally) that I had paid around £8,000.00 into the business and that I would be paid this back in full.

Now that I have left the couple have changed their minds and are saying that they will give me 'something' back but only when they sell the business. This was relayed to me over the telephone by the husband of the couple and I was so shocked that I didn't know what to say except that I needed time to consider all this.

The business is doing well and I can see no reason why they would want to sell it or even when they would and this was never part of the original agreement above.
I worked hard and for very long hours with few holidays off to help this couple and myself to build up the teaching academy side of the barber's shop (the shop was already a thriving business and I was employed there but the couple wanted to branch out into teaching).

I now feel that I have been used for my expertise in barbering to help them build the academy and, if they don't pay me back then I have effectively paid them £8K for the privilege of helping them.

I am now wondering what I can do to retrieve the £8K I have put into the business over the last three years.

Can I take them to court?

If so would it be the Small Claims court?

If it is the Small Claims court can I do this myself?

Any advice would be very welcome as I am still reeling from the telephone call and don't know where to start with all this.

Many thanks.

[atticus]

Yes, you appear to have have grounds to bring a CountyCourt claim which, being for less than £10,000, would be likely to be allocated to the Small Claims Track. You can of course DIY.

[Suzysues]

Yes, you appear to have have grounds to bring a CountyCourt claim which, being for less than £10,000, would be likely to be allocated to the Small Claims Track. You can of course DIY.

Thank you for your quick response Atticus.....do you see any issues with the contract? None of us actually signed it as it was done by email. I felt it was good enough and the wording seemed fine at the time but now looking at it with three years experience of being in business I am a bit concerned about the word 'allow' in point 9. I am worried that it seems more like the remaining business partners have a choice in terms of buying back my 20% and also I am worried that the contract doesn't actually say the word 'shares' anywhere other than at the beginning where it mentions 20% of the Academy profits and also point 1 mentions 'shareholders' but that could be construed as being other 'shareholders' and not myself. Any advice is gratefully received as I do intend to DIY this through the Small Claims Track but I don't want to go in there unprepared as I have never been in a court room in my life.

[JK2054]

Theres nothing to be worried for small claims, It's not a scary process and the court process is fairly informal.

I would say you do have the grounds to bring a claim because you never agreed to your 8K being taken.

The only Issue I see is a lot is verbal, and sadly if you get to court and its verbal v verbal you will struggle to win because its you that has to prove your case with the burden of proof (See REH and R SAOM SOP) or just underststand civil burden requires the claimant to prove on the balance of proability.

Also I see its £12k mentioned but you say only 8K was paid. What is with the shortfall please as this may cause contractual issues

[Suzysues]

Theres nothing to be worried for small claims, It's not a scary process and the court process is fairly informal.

I would say you do have the grounds to bring a claim because you never agreed to your 8K being taken.

The only Issue I see is a lot is verbal, and sadly if you get to court and its verbal v verbal you will struggle to win because its you that has to prove your case with the burden of proof (See REH and R SAOM SOP) or just underststand civil burden requires the claimant to prove on the balance of proability.

Also I see its £12k mentioned but you say only 8K was paid. What is with the shortfall please as this may cause contractual issues

Hi JK2054 - I only managed to pay 8K because I was paying in installments ('as and when we earned as agreed') and would have continued to pay up to the 12K if I had stayed longer. I have a copy of the accounts if that would help prove my case? Thank you very much for your advice - much appreciated.

[Suzysues]

Hi JK2054 - I only managed to pay 8K because I was paying in installments ('as and when we earned as agreed') and would have continued to pay up to the 12K if I had stayed longer. I have a copy of the accounts if that would help prove my case? Thank you very much for your advice - much appreciated.

By the way I would just like to add something I should have mentioned in my original post and that is the fact that all of my 20% of the shares every month for the last 3 years was kept by my business partners to pay towards my 12K investment, I also worked full time in their Barbershop as an employee and that is what I lived off. After the barbershop closed I walked through into the next room every evening to train the students in the Academy side of their business as well as constantly making sure the acedamy was advertised across social media. So, basically as things stand now I have helped them build up their teaching academy and trained their students all for free for three years if they don't pay me out.

[JK2054]

Hello,

Thank you for the clarification. The copy of accounts wouldn't make a difference because the argument could be that the 12k wasn't paid therefore any agreement upon it wouldn't be valid. Have you got an agreement for payments by installments for the same terms?


In terms of the training, was this part of the same contract, or was there a seperate agreement for the coaching/teaching?

[DE DOGS]

Just one comment, I was in exactly the same situation, (So-called Friend), The lesson don't trust where money is involved, except we built the business from scratch, and formed a Limited Company, He was the Company Sect, I also the Director, long story short,I walked away, and tricked, never trust anybody were money is involved. Good Luck

[Suzysues]

Hello,

Thank you for the clarification. The copy of accounts wouldn't make a difference because the argument could be that the 12k wasn't paid therefore any agreement upon it wouldn't be valid. Have you got an agreement for payments by installments for the same terms?


In terms of the training, was this part of the same contract, or was there a seperate agreement for the coaching/teaching?

Hello - point number 3 in the contract was the agreement for payments by installments. The training was part of the contract as the contract was for the Academy (AKA 'The School of Barbering), we were training students for around 2K+ each.

[JK2054]

The thing you have posted simply says

"but you will pay this off as and when we earn as agreed."

There is nothing I can see what the "we earn as agreed" part means. I see some percentage signs but they don't give anything to define earning as agreed.

Anyway I would say you have a pretty good chance at getting your £8k back from point 9 as I'd argue that they are buying back the 20% at the price you had paid them for it, and therfore since they have done this, and it was after 24 months you would be able to get that back.

I also see a verbal agreement that you would get back paid your £8k and although its verbal you can put it to the court along with everything else and ask that they find it true on the balance of probability

I would advise a letter of claim setting out the amount you claim and the reasons and permitting them (you need to look at which entity you are suing) 14 days (or 30 if an individual) to respond to you.

I'd then draft up your particulars and on day 15 (entity) or 31 (individual) I would send off your claim form via OCMC.