Verbal partnership agreement - don't do it!
Discussion
I was wondering if anyone could give me some advice with partnership agreement that has gone wrong. Any advice is of course taken with a pinch of salt, and I will be seeking legal advice I suspect.
In January I entered a verbal partnership with Jim and Dave, my mates. Two mistakes there!
We have been trading successfully and each provided a loan to the company, and built up a few customers. Jim and Dave clash, there have been accusations of embezzlement and threats. So far there have been no profits due to the equipment costs.
Jim organised an event and said we were going to make a donation to charity, and filed an expenses return to include the charity donation. Dave annoyed him and he has decided to say that the race was organised off his own back, deleted the expense entries and is demanding all entry fees be paid to him saying he is going pay the partnership a fee for services offered, and give the rest to charity. The flyer for the event had our website on it for registration, no other indication of who was organising it.
I have served notice of dissolution of the partnership. I would like to continue the business without Jim, who has shown no technical inclination and is a liability. Dave is at least able to work the equipment and it requires 2 people to run events.
Jim has £12k of kit at his house, and has been holding it hostage. We have several booking for September that need this kit. Dave does the accounts, there is a small sum in the bank as our loans were repaid before Jim decided he wanted all the fee money. Jim is outraged and has been threatening.
Jim is now saying he is going to bring the hostage kit to the next event, as if the partnership is continuing, and seems to have realised that he does not have a leg to stand on regarding the charity event changed terms. Jim has said that if I hold events with the equipment he has hostage he wants paying regardless of whether he helps out, which I understand is correct but I want rid of him.
Is there any goodwill with verbal partnership agreements for our booked events, googleing seems to give conflicting answers? I want to continue trading with Dave, ideally under our name. We also have a paypal account that takes money for events, although it is in the name of Dave. Most of our existing business was brought in by Dave and myself.
I suspect we have to seek legal advice but I am interested in what the general PH massive thinks. And yes I have been caught in the middle of all of this, and really don't want to end up in court.
In January I entered a verbal partnership with Jim and Dave, my mates. Two mistakes there!
We have been trading successfully and each provided a loan to the company, and built up a few customers. Jim and Dave clash, there have been accusations of embezzlement and threats. So far there have been no profits due to the equipment costs.
Jim organised an event and said we were going to make a donation to charity, and filed an expenses return to include the charity donation. Dave annoyed him and he has decided to say that the race was organised off his own back, deleted the expense entries and is demanding all entry fees be paid to him saying he is going pay the partnership a fee for services offered, and give the rest to charity. The flyer for the event had our website on it for registration, no other indication of who was organising it.
I have served notice of dissolution of the partnership. I would like to continue the business without Jim, who has shown no technical inclination and is a liability. Dave is at least able to work the equipment and it requires 2 people to run events.
Jim has £12k of kit at his house, and has been holding it hostage. We have several booking for September that need this kit. Dave does the accounts, there is a small sum in the bank as our loans were repaid before Jim decided he wanted all the fee money. Jim is outraged and has been threatening.
Jim is now saying he is going to bring the hostage kit to the next event, as if the partnership is continuing, and seems to have realised that he does not have a leg to stand on regarding the charity event changed terms. Jim has said that if I hold events with the equipment he has hostage he wants paying regardless of whether he helps out, which I understand is correct but I want rid of him.
Is there any goodwill with verbal partnership agreements for our booked events, googleing seems to give conflicting answers? I want to continue trading with Dave, ideally under our name. We also have a paypal account that takes money for events, although it is in the name of Dave. Most of our existing business was brought in by Dave and myself.
I suspect we have to seek legal advice but I am interested in what the general PH massive thinks. And yes I have been caught in the middle of all of this, and really don't want to end up in court.
desolate said:
When you say 'our loans were repaid' is that all 3 loans or just the 2 other than Jim?
Mine and Dave's loans were repaid in full, Dave didn't pay down Jim's loan on purpose at that time I think but he is only owed £600.When the partnership existed Dave brought in some kit he had been loaned for free and about 75% of the events we organise, and Dave worked on his own for months to understand our kit and build websites to support it, again before the partnership started. Jim didn't bring anything to the party, but we hoped he would be good at getting business. Jim's real success was the charity events, but he subsequently decided to take any profit away from the company over the originally agreed £1k payment.
Cyberprog said:
What's the legal basis for this? Simple partnership, LLP or LTD?
Simple partnership.Partners have a fiduciary duty to each other, I think the claim that the charity events were outside the company has breached this. I have documentary evidence of the intention to pay £1k to the charity, which Jim subsequently deleted from the expenses sheet. Google docs shows the revisions and who has made them.
The other partners both enjoy other incomes and Jim lives in a £2m house, I am a house husband with no other income apart from the event organisation, which to date has not paid any money. Jim is stating we have to make payments to him as long as we use the kit, regardless of whether he attends or not.
lost in espace said:
Simple partnership.
Partners have a fiduciary duty to each other, I think the claim that the charity events were outside the company has breached this. I have documentary evidence of the intention to pay £1k to the charity, which Jim subsequently deleted from the expenses sheet. Google docs shows the revisions and who has made them.
The other partners both enjoy other incomes and Jim lives in a £2m house, I am a house husband with no other income apart from the event organisation, which to date has not paid any money. Jim is stating we have to make payments to him as long as we use the kit, regardless of whether he attends or not.
Why don't give him a third of the kit and his 600 quid and say cheerio?Partners have a fiduciary duty to each other, I think the claim that the charity events were outside the company has breached this. I have documentary evidence of the intention to pay £1k to the charity, which Jim subsequently deleted from the expenses sheet. Google docs shows the revisions and who has made them.
The other partners both enjoy other incomes and Jim lives in a £2m house, I am a house husband with no other income apart from the event organisation, which to date has not paid any money. Jim is stating we have to make payments to him as long as we use the kit, regardless of whether he attends or not.
It's inevitable that the partnership is dead.
desolate said:
Why don't give him a third of the kit and his 600 quid and say cheerio?
It's inevitable that the partnership is dead.
Tried doing that, asked for the kit back so we can settle but he insists the partnership continues and is bringing the kit to the next event. OK so maybe we can get it back off him then, and we have lots of friends at the race.It's inevitable that the partnership is dead.
lost in espace said:
Simple partnership.
Partners have a fiduciary duty to each other, I think the claim that the charity events were outside the company has breached this. I have documentary evidence of the intention to pay £1k to the charity, which Jim subsequently deleted from the expenses sheet. Google docs shows the revisions and who has made them.
The other partners both enjoy other incomes and Jim lives in a £2m house, I am a house husband with no other income apart from the event organisation, which to date has not paid any money. Jim is stating we have to make payments to him as long as we use the kit, regardless of whether he attends or not.
Well, don't do that again! If you were a LLP or LTD then the equipment would belong to the legal entity, and a shareholders agreement would allow you to either get rid of the other partner.Partners have a fiduciary duty to each other, I think the claim that the charity events were outside the company has breached this. I have documentary evidence of the intention to pay £1k to the charity, which Jim subsequently deleted from the expenses sheet. Google docs shows the revisions and who has made them.
The other partners both enjoy other incomes and Jim lives in a £2m house, I am a house husband with no other income apart from the event organisation, which to date has not paid any money. Jim is stating we have to make payments to him as long as we use the kit, regardless of whether he attends or not.
However, simply put Jim can't just keep the partnership going, and legally the three of you own the equipment. I'd suggest that you both corner Jim and explain this to him, and split the equipment on the spot three ways. Or offer him a 1/3 of the value, gives him the choice to walk away.
I used to be in a band, and those are partnerships by default if you don't have any other legal arrangement in place.
They're governed by the Partnership Act of 1890, which is (I'm told) a very well written piece of legislation. It's certainly nice and short, which is good.
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
The critical part here is that in the absence of any written partnership agreement the terms of the partnership are as per the act.
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
In that respect the partnership may be dissolved at will, and each partner takes back out of the partnership in proportion to what they put in (assets and liabilities).
The only thing to be wary of is to make very certain that the dissolution has been sent and received by Jim, otherwise there's a legal avenue for him to claim profits back from the new partnership:
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
They're governed by the Partnership Act of 1890, which is (I'm told) a very well written piece of legislation. It's certainly nice and short, which is good.
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
The critical part here is that in the absence of any written partnership agreement the terms of the partnership are as per the act.
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
In that respect the partnership may be dissolved at will, and each partner takes back out of the partnership in proportion to what they put in (assets and liabilities).
The only thing to be wary of is to make very certain that the dissolution has been sent and received by Jim, otherwise there's a legal avenue for him to claim profits back from the new partnership:
http://www.legislation.gov.uk/ukpga/Vict/53-54/39/...
Let Jim bring the kit he has taken hostage, to this next event. Go along with this...
Then have a few big mates there to step-in and get the kit back, or divert his attention for 10 minutes, before someone else ambushes the kit removing it from his possession. Then do a Houdini yourself!
Then have a few big mates there to step-in and get the kit back, or divert his attention for 10 minutes, before someone else ambushes the kit removing it from his possession. Then do a Houdini yourself!
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