Where do I stand in this Shareholder / Partnership agreement ?

[euston0787]

I invested in a friends business over 10 years ago and assisted with the setup, maintenance and support throughout the years. In exchange he gave me 40% shareholding of the business.

The agreement was a side agreement which is challengeable in the English courts but according to companies house he was the sole 100% shareholder and director.

The company had some success, employed staff and was based in prestigious offices, but my friend in 2018 started complaining how the company was debt struck and was struggling to keep afloat. His lifestyle suggested otherwise.

To this point, the company had clients, projects in hand, employees and was working on alternative projects in R&D.

During Covid lockdown, my friend decided to file for administration as he claimed the business could no longer support itself with debts amounting in the millions !!

At the same time, my friend opened an identical company with the same name (only put Group Ltd in front of the original brand), remained in the same offices, hired the same employees, used the same email and web domains, same goodwill, same clients and had transferred the good projects from the old company to the new company, including the R&D.

He claims everything was done legit and because I was part of the old company, I no longer have any share or say in the new group which now is doing seemingly amazing !
The loss-making projects have been put into administration whilst retaining all the potential good projects from the old company.

His defence: He had to take drastic action to restructure the company, buy the old company for £1, take over the employee costs and office costs. He claims all the projects were loss leaders in the old company by demonstrating audited accounts.

Today, I can clearly see that those projects were not loss leaders and the R&D project has now taken off and is estimated to be worth in the hundreds of millions !!

Because I was not part of any of the restructuring or the new group, hence I have no claim or share !

The new company has now gone on to execute and develop more projects which are all profit making !

Do I have any leg to stand on – Surely, this was a blatant attempt to just oust me out of the shareholding ? It is practically the same company which he now owns 100% !! Isn’t he now benefiting from all the goodwill the old company earned from last 10 years and leave me with nothing ??

[atticus]

[see next post]

[atticus]

I am sorry to read this. What you describe is a difficult situation. I would want to go through everything in detail with you, review all documents etc.

Was there a written agreement in respect of your investment and the 40% shareholding? Were you ever paid any dividends in respect of the 40% shares?

You may have a claim based on legal concepts of trust and fiduciary duty.

However, it will be complicated and expensive. I would recommend specialist professional assistance.

[euston0787]

I am sorry to read this. What you describe is a difficult situation. I would want to go through everything in detail with you, review all documents etc.

Was there a written agreement in respect of your investment and the 40% shareholding? Were you ever paid any dividends in respect of the 40% shares?

You may have a claim based on legal concepts of trust and fiduciary duty.

However, it will be complicated and expensive. I would recommend specialist professional assistance.

Yes I had a side agreement detailing shareholding and I think the most important clause being:

Transfer of Interest
6. A member will not in any way transfer ownership of their interest in the Joint Venture or its assets. Any such transfer is prohibited without the prior written consent of all existing Joint Venture members, and if attempted, will be void and without force or effect.


I was paid dividends but not proportionate to the percentage share. It was more like here and there just to keep me at bay and was never privy to the full accounts.

[atticus]

The way you described things in your first post, that clause 6 does not apply. You have said that the company went into administration. That is not a transfer of ownership.

The "dividend" payments not being linked to the percentage figure does not make this any easier.

As I said, you need to take professional advice. Before I retired from practice, I would have looked at at this type of case, but the fee for an initial review might well have been in the order of £1,000 - £1,500, plus VAT.

[euston0787]

The way you described things in your first post, that clause 6 does not apply. You have said that the company went into administration. That is not a transfer of ownership.

The "dividend" payments not being linked to the percentage figure does not make this any easier.

As I said, you need to take professional advice. Before I retired from practice, I would have looked at at this type of case, but the fee for an initial review might well have been in the order of £1,000 - £1,500, plus VAT.

I stand corrected from my first statement - The old company is still going through administration and is not yet completely dissolved. Taking full advantage of the covid rules, my friend bought time in winding down the company but before that, bought the company for a consideration of £1 because of its mounting debts. He then stripped the old company of its assets and left all the crap and filed for chapter 11 only until as recent as February 2022.

What are you credentials ? Have you dealt with this type of litigation and dispute law before ?

[atticus]

chapter 11?that is US law.

Yes, I have handled this kind of case, with a good track record of success. But, as I said, I am retired from practice, now in academia.

[euston0787]

chapter 11?that is US law.

Yes, I have handled this kind of case, with a good track record of success. But, as I said, I am retired from practice, now in academia.

I mean filed for administration in the UK