Any legal implications in dissolving this company?

[priley]

Without giving too many gory details the limited company was created almost a year ago but hasn't begun trading. There are three partners all contributing different things however as A and B were bringing more to the table in terms of product, C has made the majority of the effort in getting things moving. Unfortunately due to various reasons A and B no longer wish to continue the business (possibly starting a similar one of their own) leaving C understandably rather perturbed. C is currently asking to be remunerated for his time but is he in a legal position to do so as opposed to being offered something as a gesture of goodwill?

[Alpinestars]

Who's he claiming recompense from? Presumably the company has no assets other than cash from the original share subscription? In which case, if he is claiming from the company, it will only be able to satisfy a small amount.

You could apply for the company to be struck off.

[priley]

Each person put in £500 just to get things started. I guess he's claiming recompense from A and B for his time and ideas that he feels they can benefit from by continuing without him.

[Ultraviolet]

priley said:

Each person put in £500 just to get things started. I guess he's claiming recompense from A and B for his time and ideas that he feels they can benefit from by continuing without him.

The contractual relationship between all parties is with the company; I wouldn't have expected any personal guarantees to have been given by any individual personally (although you may want to check this). As such, if all goods and services were provided for the benefit of the company, he would need to claim against the legal entity. If this is dissolved, apart from a distribution of the assets in accordance with shareholding (unless any parties made loans to the company) there won't be anything to claim against... He could object to the dissolution of the company, but not sure what grounds he could cite...

UV

[Eric Mc]

Just a wild guess, is the OP Mr C?

[priley]

Thanks chaps. Just hoping things don't get too silly. Could he sue for example?!

[priley]

Eric Mc said:

Just a wild guess, is the OP Mr C?

No, Mr A.

[Du1point8]

You can understand why Mr C is annoyed if he has put in a lot of time and effort in, only for Mr A and B are going to take that work, dissolve the company and set up shop without him.

I can only imagine how upset the guy is at the moment.

[Eric Mc]

Yes - Mr C should rightfully be Mr Angry at the moment.

As ever in these circumstances, the obvious question has to be, was there a shareholder's agreement in place?

[Simpo Two]

Well I'm going to be Mr D and take 10% off everyone. Meh.

[priley]

Mr C does indeed have a right to be angry but there are some personal and other issues that have made things untenable.

[priley]

Ultraviolet said:

The contractual relationship between all parties is with the company; I wouldn't have expected any personal guarantees to have been given by any individual personally (although you may want to check this). As such, if all goods and services were provided for the benefit of the company, he would need to claim against the legal entity. If this is dissolved, apart from a distribution of the assets in accordance with shareholding (unless any parties made loans to the company) there won't be anything to claim against... He could object to the dissolution of the company, but not sure what grounds he could cite...

UV

So if the company was yet to be dissolved could he charge the company for his time, despite the fact that one third of the bill would be his? Would the company have needed to have begun trading for this?

[johnfm]

priley said:

Ultraviolet said:

The contractual relationship between all parties is with the company; I wouldn't have expected any personal guarantees to have been given by any individual personally (although you may want to check this). As such, if all goods and services were provided for the benefit of the company, he would need to claim against the legal entity. If this is dissolved, apart from a distribution of the assets in accordance with shareholding (unless any parties made loans to the company) there won't be anything to claim against... He could object to the dissolution of the company, but not sure what grounds he could cite...

UV

So if the company was yet to be dissolved could he charge the company for his time, despite the fact that one third of the bill would be his? Would the company have needed to have begun trading for this?

He could only legitimately 'charge the company for his time' if the company agreed a contract for his services. In order for him to pursue any debt arising from the invoice he will need to prove there was a contract.

There may be other non-contractual issues involved, depending on what the guy actually did.

[Alpinestars]

priley said:

So if the company was yet to be dissolved could he charge the company for his time, despite the fact that one third of the bill would be his? Would the company have needed to have begun trading for this?

It's irrelevant what he charges. The company has no assets so what's he going to claim. If he makes a claim, the company will be insolvent, but he still won't get paid. Futile.

[priley]

Thanks folks. All an unfortunate mess but I appreciate your help and hopefully we can sort things out amicably.

[Martin4x4]

priley said:

Each person put in £500 just to get things started. I guess he's claiming recompense from A and B for his time and ideas that he feels they can benefit from by continuing without him.

Has this produced any tangible assets?

Have these been capitalised in the accounts in anyway?

[priley]

Tangible assets? Myself and Mr B were bringing product that would be sold via the site that Mr C spent his time researching and developing ideas for.

[Eric Mc]

"Bringing product" - what does that mean?

Has the company purchased any fixed assets - such as vehicles, land and buildings, equipment, furniture etc.

If so, have these purchases been properly capitalised?

Have any such fixed assets been introduced into the company by the directors personally?

What type of accounts and records are being kept on a day to day basis.

Has a set of accounts been prepared at any stage?

Is there a clear and concise record of the value of each of the directors' loan accounts so that balances due to or by each director can be easily identified?

[priley]

The product was downloadable files that A and B had accumulated. C took on the role of making headway into creating a site. There have been no loans, trading or invoicing to the company. It's approaching the end of its first year.

[Eric Mc]

Has the company actually bought anything?

Has it expended any real money?