Am I being overly suspicious?

maxwell smart

Here is the situation:

I do some consultancy work for a particular client. He can't do this type of work as it is very specialised. We agreed some time ago that when we got a sufficient level of business we would setup as a seperate company and funnel all the business through here, as at present all the contracts for service are with his company.

I told him yesterday that now is the time to set up a formal agreement between us. I sent over a draft interim agreement with a view to this. He called me this afternoon saying that he can't sign it as it might put me in a very difficult legal position as he has large personal debts (I thought to myself..who doesn't?). Anyway, is this a fudge on his behalf? We have a pitch for a particularly juicy contract next week that would set us up for 12 months, is he getting itchy feet and thinking of shafting me? I would not have thought he was the type, but I did have a run in with his wife over a previous customer. She told me that I was wrong in my approach, I told her.......well I told her I did not agree with her point of view. I'm sure she's in his ear about me 24/7!

Anyway the question is, am I exposing myself to any of his personal debt by signing a draft agreement to set up a seperate legal entity? (i.e. a company). I don't believe I am but need to get a second opinion.

Thanks
Max

Bandara

maxwell smart wrote: »

Here is the situation:

I do some consultancy work for a particular client. He can't do this type of work as it is very specialised. We agreed some time ago that when we got a sufficient level of business we would setup as a seperate company and funnel all the business through here, as at present all the contracts for service are with his company.

I told him yesterday that now is the time to set up a formal agreement between us. I sent over a draft interim agreement with a view to this. He called me this afternoon saying that he can't sign it as it might put me in a very difficult legal position as he has large personal debts (I thought to myself..who doesn't?). Anyway, is this a fudge on his behalf? We have a pitch for a particularly juicy contract next week that would set us up for 12 months, is he getting itchy feet and thinking of shafting me? I would not have thought he was the type, but I did have a run in with his wife over a previous customer. She told me that I was wrong in my approach, I told her.......well I told her I did not agree with her point of view. I'm sure she's in his ear about me 24/7!

Anyway the question is, am I exposing myself to any of his personal debt by signing a draft agreement to set up a seperate legal entity? (i.e. a company). I don't believe I am but need to get a second opinion.

Thanks
Max

Its solicitor time tbh, no point in getting internet advice from people that you can't verify on something like this, the details are too important.

Good luck.

maxwell smart

I knew it was going to come to a solicitor. I just didn't want it to come to a solicitor!

Thanks

maxwell smart

maxwell smart wrote: »

Here is the situation:

Anyway the question is, am I exposing myself to any of his personal debt by signing a draft agreement to set up a seperate legal entity? (i.e. a company). I don't believe I am but need to get a second opinion.

Thanks
Max

No your not, but you need to clarify it in all your contracts and have shareholders agreements. A solicitor should be able to tell you when and where you need to make those points in a few minutes. Most likely he/she will want a fee to look over all your contracts and then bring up various points you "must" change though so watch out

dbran

Hi Maxwell

If you set up a seperate legal entity then there is no way you can be saddled with the personal debts of another director unless you allow yourself to be so.

One thing that i would mention though is that nowadays people are doing credit checks of both the directors of a company before they commence to do business. If the other director has a low credit rating it may affect your pitch as the customer might be concerned that you will not be able complete the contract due to financial difficulties.

As the lads have mentioned, do take proper advise on the contract. One you have drafted yourself may not be very good or even useless.

Kind Regards

dbran

antoinolachtnai

It looks like he just wants to hang on to everything he can. In general terms, if you set up a limited company with him that problem he mentions would not arise. (It could arise with a badly structured partnership arrangement.) Of course you would really need legal advice regarding this.

The problem is that there is very little you can do from the negotiating position you are in, without causing a lot of upset for customers. What legal hold do you really have?

If you want to flush out whether this is a fudge, ask him is there any way you can help him with his financial situation, perhaps by buying out some part of his business.

In fairness to this guy, a lot of people are in desperate financial straits at the moment, even if they look pretty comfortable. When that happens, he is unsurprisingly putting his creditors and his family ahead of whatever informal commitments he made to you. That is understandable, so try and find a way of working with it.

padser

Simple solution here.

You can get a company speed registered in about 1 week (you will need to contact a large solicitor firm that has one off the shelf, it might cost you €1k or so all in - although I am not certain of exact prices).

That should put you in the position of having a company ready to go by the time its time to sign contracts for the pitch next week (it might not be ready for the pitch, but I assume there will be some lag before you need to sign).

Just put this one contract into the company, and you can work on moving the rest over during the next few months.

maxwell smart

Thanks for the responses, I'm wondering if he reads boards! He rang me this morning and came clean. He just does not want to go into business with me! (I thanked him for his honesty).
His only problem, which I don't think he realises, is that we previously agreed to split everything 50:50. He will realise that in actual fact he contributes nothing to the deals we do and in fact I do all the work.
So I'm going to charge him as any contractor does. I am both pi**ed off and thankful the way things turned out.

I have learned that it's best to make things clear from the start!