4% of something is better than 10% of nothing

riverbank

Sorry about the header, nicked it from a song...

Don't know if I am in the right place but most people in business will probably know the answer..so here goes

I started up a small business with my girlfriend (I knew it was doomed from the start) , a 50/50 Limited Company.
The business stumbled at the first hurdle and never really got going but has assets of a couple of grand and is keeping me in work so I am happy to stumble on for the foreseeable future, ...so now comes my question....

My ex (told you it wouldn't last) wants out, not worried about the finances, just wants out, to resign her directorship/company secretary position (not that she has done a stroke for the business).

So now I need a new business partner to stay legal.

My problem is that the family and friends that I have approached are worried that if they sign anything and I incur massive debts will they be liable for them.

What I want to know is does the % of your shareholding affect your liability or if only one of the partners have assets can everything be collected from them even if they own lets say just 5%.

Basically I am asking if I hold 95% of the shares will I be liable for 95% of the debts and would my partner only be liable for 5%.

This seems logical to me but I need it clarified to persuade someone to put pen to paper.

Thanks for taking the time to get this far.

Cheers

River

buzz11

River,
You gotta read up on how companies run and are structured, not knowing is going to cost you. Check out the CRO website as a starting point.

Anyhow to answer your question, why not change your company setup so that you are the 100% shareholder and then just get another person to act as a director.

Bear in mind that being a director has obligations and you don't get away scot-free if things go wrong. If you're asking someone to be a director in your company, can they have faith in your ability? do you have the knowledge to answer their questions about structure/responsibility as directors.

riverbank

buzz11 wrote: »

River,
You gotta read up on how companies run and are structured, not knowing is going to cost you. Check out the CRO website as a starting point.

Anyhow to answer your question, why not change your company setup so that you are the 100% shareholder and then just get another person to act as a director.

Bear in mind that being a director has obligations and you don't get away scot-free if things go wrong. If you're asking someone to be a director in your company, can they have faith in your ability? do you have the knowledge to answer their questions about structure/responsibility as directors.

The obvious answer to your last question is NO, which is why I posted my question in the first place. And regarding the CRO website I scrolled through it and unfortunately struggled with all the business talk gobbledygook so emailed them an got the reply that they don't answer such questions and that I should seek professional advice. OK, so I thought I would try to get some FREE advice which is what these forums are all about. Unfortunately like most things there is no such thing as a free lunch so it looks like I will get replies from people that don't know the answer themselves but are just want to put in their four pennyworth.

Mind you if you do know about a directors responsibilities if the company closes with debts feel free to let me know...that's a NO then is it? thought so.

As you can clearly see I got out of the wrong side of the bed this morning

buzz11

You got the 'tough love' reply!

You need to change your company structure to single member company where you own 100% of the shares. Your accountant will do this. Have you agreed with the other shareholder how much the shares are worth? discuss this with your accountant.

The CRO has a leaflet on single member companies, print it out and take to bed some night and read it carefully. Its detailed but if you know it inside out then you know nearly everything about it.

As regards directors responsibilities, send me a PM and I'll email some articles that I clipped from various business magazines, they explain things very well.

Fergal C

Limited companies involve complicated legal and accounting issues. You really need to get the advice of an accountant, as opposed to trying to sort it all yourself. You should also ask your accountant about the option of dissolving the company and becoming a sole trader, it might make things much easier for you and have the added benefit of reducing your future accountancy and compliance costs.

riverbank

Fergal C wrote: »

Limited companies involve complicated legal and accounting issues. You really need to get the advice of an accountant, as opposed to trying to sort it all yourself. You should also ask your accountant about the option of dissolving the company and becoming a sole trader, it might make things much easier for you and have the added benefit of reducing your future accountancy and compliance costs.

I have decided that might be the best option, it will be worth the cost just to get a decent nights sleep, Mr Accountant, here I come

NCG

I wouldn't base any important business decision solely on advice received on an internet forum. However, to give you some initial food for thought while you consider your options-

You can have a company with only one shareholder.
It must have at least 2 directors.
It must have a secretary (who can be one of the directors.
The shareholders' liability is limited to the amount of their share capital (probably something nominal like €100 in your case).
It is the directors who are most exposed. They could be held personally liable for debts (eg as a result of reckless trading), or for damages (health and safety issues). Not being directly involved in the management of the company (eg a "friend") would not be a defence. It is therefore correct to be wary of being a director in somebody else's company.

These are general statements of course. You should get specific advise when you have some ideas as to what you would like to do.

Regards
Niall

http://ncg.ie

padser

NCG wrote: »

I wouldn't base any important business decision solely on advice received on an internet forum.

True

NCG wrote: »

You can have a company with only one shareholder.
It must have at least 2 directors.
It must have a secretary (who can be one of the directors.
The shareholders' liability is limited to the amount of their share capital (probably something nominal like €100 in your case).
It is the directors who are most exposed. They could be held personally liable for debts (eg as a result of reckless trading), or for damages (health and safety issues). Not being directly involved in the management of the company (eg a "friend") would not be a defence. It is therefore correct to be wary of being a director in somebody else's company.

All true and put simply - this is strange, don't normally see legal type advice given on boards that actually true

NCG wrote: »

http://ncg.ie

Ah - he is promoting a professional services firm....makes more sense now :rolleyes:


However - in NCG's defence he went to the trouble of providing a detailed and correct reply before his plug!



Anyway - back on topic.

Bottom line is that directors are potentially liable, and you need two of them. If you can't convince family / friends you are competent enough it's a little difficult to know what to suggest.....