A little story

MMW

A little story

Four women started a small business together,
all four contributed equal amount of money,
only three gave total time and effort in promoting business,
fourth woman only seems in it for easy ride, (thinks business can't survive without her even though she's the least qualified)
fourth woman causing arguements with other hard working women on a daily basis, customers starting to spot this,

Question: how can three hard working women tell this lazy freeloader to hop it?


note:all names and places changed to protect identity

Time Magazine

MMW wrote:

note:all names and places changed to protect identity

You named no names or places .

And I hope you're not suggesting this is true to life and you're looking for advice?

MMW

This isn't true to life, its hypothetical, although sometimes the truth is stranger than fiction, just wondering what could be done if this suitation arose for real

seamus

Long story short: You have to buy her share of the business from her.

Talk to a solicitor.

MMW

but could this person be forced to sell? can she refuse

is_that_so

One would assume that there was enough sense to draw up a contract. If not it could be costly both in terms of friendship and the business. You should always have a contract even if it's family or good friends. IMO a "frank and open discussion" could/should be used to resolve the issues. Failing that the solicitor would need to get involved.

dermot_sheehan

Is there a contract between the women? Have they incorporated a company or merely acted as a partnership?

MMW

they are set up as a company and all four are registered as directors

is_that_so

Depending on the set-up they may be able to replace or remove the director and buy out her share. Again a solicitor can better advise. An EGM/AGM to discuss it might also be good.

Overheal

well if it were an organised company I might have assumed the 3 would be able to supercede any decisions by the 4th? I agree with above poster: take it to a solicitor or EGM. I can't say I'm up to scratch on business law /=/ but this kind of friction may be covered under some fine print somewhere.

Ava

while theoretically a special resolution could be passed to have her removed, this power must be exercised bona fide in the interest of the company.

however as this appears to be a quasi partnership private company this could give rise to a s205 application (shareholder oppression) [ie if like above poster said they supercede all decisions and/or try to remove her ]which does not need to be exercised qua member but can be brought by a director also. see re: Murph's Rest.

what could happen here as was the outcome in the above case a s213f application could be ordered which is where the court would wind up the company on just and equitable grounds

ie company would be dissolved.


speak to a solicitor who will better explain the situation.

Overheal

May I be bold as to request more data here? You said she was doing the least to 'promote' the business but it can still be interpreted that she could be contributing in other ways... ???

dermot_sheehan

As noted above, in an incorporated company situation, the company or majority shareholders can not oppress a minority. Best solution would be to buy her out. How is she not contributing? If you feel she's not doing enough work for the company, have the company hire the directors who are doing work on employment contracts and pay them commiserate with the work they're doing (bearing in mind all the companies act requirments on setting directors pay, etc.)

As noted above, if you oppress too much, she could take a s. 205 petition which allows the court to do pretty much anything to stop the oppression (including ordering the majority to buy out the minority as per Re: Irish Press). Alternatively a petition to wind up the company on just and equitable grounds under s. 213 can be done, this litigation is pretty pricey though.

Stirling

Again this is just purely hypothetical...

I'm with Ava and would just like to make one point - I would be cautious about trying to go down the in your face legal route just yet. The solutions she refers to, especially the s213 (f) winding up on just and equitable grounds and the s205 application may solve the internal problem as between the three directors and the "freeloader" but could in the process lead to damage to the business which they have built up.

The winding up and the s205 can lead to the airing of the dirty linen of the business in public which, even though there is a facility for the hearing of such appliactions in camera (in private) I think, could cause damage to the interests of the people concerned should the freeloader decide to tell tales out of school so to speak.

It is for this reason that I would suggest negotiation which you don't mention happening in the hypothetical situation. Paying the freeloader off might be a bitter pill to swallow at the time but could ultimately lead to less damage being done to the hypothetical business.

Overheal

Stirling wrote:

The winding up and the s205 can lead to the airing of the dirty linen of the business in public which, even though there is a facility for the hearing of such appliactions in camera (in private) I think, could cause damage to the interests of the people concerned should the freeloader decide to tell tales out of school so to speak.

Hmm....bringing the Business into disrepute, eh? That might be a good point to note...Also remind said hypothetical being of the dirty-side of Slander