business buyout difficulty

skidoo

I am currently trying to buy out my business partner due to her lack of interest in the business. We are in a 50/50 limited company for past 5 years and run a retail/medical outlet. Currently, the business is in an overall loss due mainly to loans which will be finished this Summer after which I feel I can really make a go of it. I have offered my partner a sum for her shareholding which she agreed to in November. All the appropriate paper work has been completed but when she was supposed to sign last week she pulled out at the last minute.

She is not currently working in the shop-I am running it single handedly since Dec and am trying to repair the damage she has done to the business(I was on maternity leave up until then). I have offered her the money again but am yet to hear from her. She has mentioned on a number of occassions that she wants to liquidate the business-this she has used as a threat to me to get more money but I am not willing to give her a penny more. Liquidation would leave us both with debts of approx 20000 each due to lease commitments and bank agreements that have personal guaruntees .

I have the upper hand as I am qualified to carry out medical procedures that make up the foundations for this business but she is not and has no chance of being so her staying in the business alone would not work and I will not work with her anymore.

I think I will have to start liquidation to try and threaten her. I don't think she understands what this exactly entails so hopefully this might get her to finish the deal. Has anyone any other suggestions?:)

TheCostumeShop.ie: Ronan

Best to directly ask what her intensions are by calling an "extraordinary general meeting" or if one is due an AGM.

Being a director has certain legal implications. For example if she purposely puts the business under and leaves a debt due to pure neglect on her part she becomes personally liable for her part in the debt beyond that of personal guarantees.

I think you should probably seek legal advise and get a solicitor involved. We don't know all the details here but it sounds like the obvious play would be to agree to put the company into liquidation as a going concern if that's what she wants, then buy back her share the business for a nominal €1 consideration and assume the debt as the business could be valued at Zero based on your above comments.

skidoo

Thanks for that good advice. That's more or less what my accountant was suggesting although I need to get more advice re:buying business as going concern. I am due to speak to my solicitor Monday and after a lot of thought I think I will move towards liquidation.

My accountant suggested that I use the money I was going to use to buy her out to settle any important debts and renegotiate lease/overdraft etc myself and try and salvage the business alone.I would have an excellent relationship with all creditors, bank and landlord which she does not so I should be able to sort it out.

What would happen though if she did not agree to liquidation?

antoinolachtnai

She is quite correct to say that she can force a liquidation. This is what has to happen when principals disagree and there is no shareholders' agreement.

If this happens, you will have to buy the business from the liquidator in order to save it. This is perfectly feasible and if the facts are as you describe, creditors will be anxious to facilitate you. You should be able to trade straight through the liquidation.

However, it is expensive and messy. In a situation like this, i fear a liquidation will cost you tens of thousands of euros in legal and liquidator fees

At the end of the day, your partner is trying to push you for a better price for her share. You will have to pay more than you would like to pay, although payment can be over a period. It may also be that she wants to buy you out.

It is hard to be more specific without more detail. One thing you need to get a grip on is the figures. When you say there is an overall loss, you need to be clear on whether you mean there is negative cashflow, there is negative earnings, negative EBIT or negative EBITDA. this sounds technical but is very important to know.

The overall answer is that you have to find a way to negotiate. Negotiation is basically about finding a way to be objective about your shared problem. Both of you need an advisor who can help you do this. Otherwise it is all going to end very messily for both of you.

NumbrCrunchr

The liquidation route is costly and time consuming. There is also a risk that the liquidator may find a more attractive offer for the business than you can offer...

It doesn't sound like it is in anyone's interest to liquidate. At the end of the day it is about resolving a dispute and horse-trading about money. Mediation or a meeting chaired by an honest broker may reach a conclusion easier and cheaper than the liquidation / legal process.

Regards
NumberCruncher