Business Partner

A question about : Business Partner

A friend of mine (A) set up a limited company last year with a friend (B). It didn't work out, and friend A had invested a considerable amount of money into the business. They ceased trading at Christmas, but B had set up the company and was responsible for all the accounts, and despite being asked many times has not provided A with any sets of accounts.

6 months on, B is refusing to acknowledge any communication from A, letters, emails, texts, even refusing to answer the door when A has gone round! The company is still 'live' on Companies House, and has now missed the filing date, so a fine is due, despite the multiple reminders from A to B!

What are my friend's options now? She feels aggrieved as she has lost most of her savings, so there is that aspect, but also does not want this head-in-the-sand attitude to end up with her owing even more! Is there any way that any of her money can be recouped (it was set up as a loan to the company), and can she now put the burden of blame for any outstanding monies on B?

Best answers:

• As A is a director of the company, she is jointly and severally liable for returning the annual return of the company. As I said, "Failing to file the annual return on time, or not at all, could result in prosecution. If you are convicted you could end up with a criminal record and a fine of up to Ј5,000. You may be disqualified from acting as a director."
  As I also said, an annual return is not the same as accounts. Unless there was an agreement to bring forward the annual accounting date, then submission of the annual accounts would not yet be due. As a shareholder, A would be entitled to the official company accounts when these are prepared and approved. However, as A is also a director she is personally responsible for ensuring the annual accounts are prepared, approved and submitted. I suggest that if she cannot get any help from B in this regard she should start getting on with it herself. An accountant may be able to help her.
  The difficulty with a 50/50 shareholding is that a stalemate situation can arise when there is a failure to agree, and hence why this is often advised against. As a non-majority shareholder, there is little A can do to force a decision that B does not wish to comply with. However, if B simply is walking away (i.e. disinterested in the company any more), then perhaps A can take matters into hand by acting as Chair in a general meeting called. A should refer to the M&A of the company as to whether or not this could be possible.
  Does A have a personal guarantee from B with regards to the loan? Otherwise the loan is with the limited company which is an entirely separate legal entity. It could be argued that as the company is still in existence, no refund of any loan is due at present.
  If A does believe that the money is now due to be returned, then legal action may be required. This should be against the limited company (unless personal guarantees were obtained). A judge will then decide.
• Thanks for your answer. I spoke to my friend and she has no idea how she can go about anything accounts-related as her partner has all documents, invoices, receipts, etc, as this was how they split the running of the business.
  Can the business be dissolved via Companies House without the other partner's signature? Or could my friend resign as a director? it seems crazy that she could end up owing money due to the total lack of response from the other person! (by the way there is a trail of letters/texts/communication that can be traced to show that there has been no response)