LTD Company - Director taking money
Discussion
My friend (John) and his business partner (Fred) own 50% shares each in their LTD company and are both directors. They have an understanding that they share out the profit 50/50 and the share holding backs this up.
The other director (Fred) is not happy with the effort John puts in and has not shared out the profit 50/50 (he deals with the money side of the business) he had taken part of Johns profit and kept it for himself without Johns agreement.
There is no directors agreement of who does what in the business, am I right what Fred had done is embezzlement and is a criminal offence. John is going to tell Fred he will call the police.
The other director (Fred) is not happy with the effort John puts in and has not shared out the profit 50/50 (he deals with the money side of the business) he had taken part of Johns profit and kept it for himself without Johns agreement.
There is no directors agreement of who does what in the business, am I right what Fred had done is embezzlement and is a criminal offence. John is going to tell Fred he will call the police.
The first lesson in going into business together in this way is to have a Shareholders Agreement determining how profits are shared and also what happens when one owner wants to leave.
I would first of all make sure the bank account is dual controlled that way all payments are approved by both Directors.
Next step would be to split by one buying the other out or liquidating the business.
Sounds like trust has broken down so probably no chance of carrying on together.
PurpleMoonlight said:
In what way has the money been taken out of the business?
^^ This is the missing bit of information.Dividends when paid are based on share ownership and cannot really be deviated from that metric.
Salaries are typically individual and based on the needs of the person receiving them and their contribution to the business.
Loans can be taken by agreement, but would have to paid back.
This question aside, it sounds like one director is getting upset by another not carrying his share of the burden. Perhaps the other director needs to reduce his salary or defer his dividends..
Edited by Hol on Friday 17th August 09:26
PurpleMoonlight said:
In what way has the money been taken out of the business?
^^ This is the missing bit of information.Dividends when paid are based on share ownership and cannot really be deviated from that metric.
Salaries are typically individual and based on the needs of the person receiving them and their contribution to the business.
Loans can be taken by agreement, but would have to paid back.
This question aside, it sounds like one director is getting upset by another not carrying his share of the burden. Perhaps the other director needs to reduce his salary or defer his dividends..
Edited by Hol on Friday 17th August 09:31
PAULJ5555 said:
My friend (John) and his business partner (Fred) own 50% shares each in their LTD company and are both directors. They have an understanding that they share out the profit 50/50 and the share holding backs this up.
The other director (Fred) is not happy with the effort John puts in and has not shared out the profit 50/50 (he deals with the money side of the business) he had taken part of Johns profit and kept it for himself without Johns agreement.
There is no directors agreement of who does what in the business, am I right what Fred had done is embezzlement and is a criminal offence. John is going to tell Fred he will call the police.
It's such a big area, it's hard to give accurate advice.... The other director (Fred) is not happy with the effort John puts in and has not shared out the profit 50/50 (he deals with the money side of the business) he had taken part of Johns profit and kept it for himself without Johns agreement.
There is no directors agreement of who does what in the business, am I right what Fred had done is embezzlement and is a criminal offence. John is going to tell Fred he will call the police.
As above, your friend should have a Shareholders Agreement in place - very easy to do. Also to be a co-signatory on payments.
Taking out a dividend that does not correspond with the equity (i.e. not 50/50 in this case) means that the company now owes John some cash I would have thought -John should demand his dividend payment.
Has Fred commented on his actions? Is there much money involved?
The 'effort' thing is a red herring. I had directors where some worked harder than others.
From what I know, cash comes in and also money is paid directly into the bank from customers. The cash gets recorded and is declared to HMRC but is not banked, it gets split 50/50 and goes in the pocket of both directors.
It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
PAULJ5555 said:
From what I know, cash comes in and also money is paid directly into the bank from customers. The cash gets recorded and is declared to HMRC but is not banked, it gets split 50/50 and goes in the pocket of both directors.
It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
Oh right. We're talking beer money really in the global scheme of things. Sounds like they only need to sit down and talk about it considering the amount involved. Police/embezzlement is a bit extreme for £600. It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
cbmotorsport said:
PAULJ5555 said:
From what I know, cash comes in and also money is paid directly into the bank from customers. The cash gets recorded and is declared to HMRC but is not banked, it gets split 50/50 and goes in the pocket of both directors.
It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
Oh right. We're talking beer money really in the global scheme of things. Sounds like they only need to sit down and talk about it considering the amount involved. Police/embezzlement is a bit extreme for £600. It is some of the cash that Fred had not shared out. Its about £600 so far.
Its a landscaping business.
They also can't really part ways because of the individual skill they both have and customer bases. It looks like a case of cant work together but cant work apart.
If someone stole £10 or £1000 its still theft and a police matter.
cbmotorsport said:
PAULJ5555 said:
If someone stole £10 or £1000 its still theft and a police matter.
It really isn't though in this situation if there's no shareholders agreement, or nothing in writing as to how money and profits are distributed. If Fred gave John nothing then John could sue Fred for his 50% of the profit as per his shareholding, maybe its not embezzelment because of the lack of directors agreement I suppose the police would decide on that one.
TwistingMyMelon said:
I really hope they dont go tot he police to waste their time
They need to sit down like adults and sort it out,
Quite. They need to establish a shareholders agreement and company articles and work out their differences. If it's getting nasty over £600 quid, then it'll get a whole lot worse if the turnover goes up. They need to sit down like adults and sort it out,
This is not a police matter. It's more a case of acting like adults and sorting stuff out for the benefit of their livelihood. Or agreeing to go their separate ways and sharing out any assets the company may have.
feef said:
Can also depend HOW the profits are taken out.
If the profits are taken out in the form of a dividend, and they both have the same share type in equal quantities, then he dividends need to be split accordingly.
This is only true if both own the same class of shares.If the profits are taken out in the form of a dividend, and they both have the same share type in equal quantities, then he dividends need to be split accordingly.
If one has 'A' shares and the other 'B' shares then each share class can receive a dividends independent of each other.
Helicopter123 said:
feef said:
Can also depend HOW the profits are taken out.
If the profits are taken out in the form of a dividend, and they both have the same share type in equal quantities, then he dividends need to be split accordingly.
This is only true if both own the same class of shares.If the profits are taken out in the form of a dividend, and they both have the same share type in equal quantities, then he dividends need to be split accordingly.
If one has 'A' shares and the other 'B' shares then each share class can receive a dividends independent of each other.
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