Singing Pig

I want to resign from a business I set up with 2 others and sell my share of the business because I'm not happy with the way the company is being run. The other 2 directors claim they can not afford to buy me out and the company does not have enough capital available to pay me off either. They could take out a bank loan but they don't want too.

What advice would anyone have for someone in my situation? I don't want to stay a shareholder as I feel the company could go bust the way it's heading. 

Hi

Assuming this is a partnership, not a limited company, then if you've got a partnership agreement in place, this should set out what happens and how.

You probably need to talk to your accountant and/or lawyer as they'll understand your business better than any of us can from a post on this board.

The advice will probably cost but if your feelings are right, it should pay for itself in reduced potential liabilities.

Trevor 

Q. How does a partnership end?

A. The parties can expressly agree that a partnership will end at a specified date, or upon completion of certain tasks.

 In some jurisdictions a partnership may end on the death or bankruptcy of a partner unless the partnership agreement expressly states otherwise.

Absent an agreement, partners can make a written submission to the other partners to have themselves withdrawn from the partnership.

A partnership agreement should protect the partnership and remaining partners from the withdrawal of an essential partner.

If the voluntary withdrawal of a partner offends a term of the partnership agreement then the withdrawing partner may be liable for any damages suffered by the partnership or remaining partners.

As the previous poster noted, a partnership agreement would identify the methods for dissolving the partnership, essentially, as soon as 1 partner resigns the partnership is dissolved and the remaining partners would create a new agreement.

I am pretty certain the OP is referring to a (limited) company, not a partnership.

If so, it will be necessary to find another person to buy his shares,

The title of the question must have thrown me, it clearly states Partnership...

bill mccallum:

The title of the question must have thrown me, it clearly states Partnership...

 

It does. :)

 But "director" and "company" lead me to think otherwise?

You really need to come to an agreed settlement. If they refuse to take out a loan then convert your ownership stake into a loan to the business so you have a more senior claim and no more liability compared to being a partner or equity stakeholder.

Or have them secure what they owe you against their homes, their cars of something else of value.

Like I said, you really need to come to an agreed settlement as you really cannot force them to do much at all. A solicitor or business broker might have some ideas for alternative strategies.

Are they open to taking on a new partner or raise fresh capital? The new capital can be used to pay you off. 

John Corey

royce:

I want to resign from a business I set up with 2 others and sell my share of the business because I'm not happy with the way the company is being run. The other 2 directors claim they can not afford to buy me out and the company does not have enough capital available to pay me off either. They could take out a bank loan but they don't want too.

What advice would anyone have for someone in my situation? I don't want to stay a shareholder as I feel the company could go bust the way it's heading. 

  

I would suggest you search for someone on singing pig to buy your out, after all, it's full of investors.  However, you've already told us all too much about the state of the business!  Presumably someone else would have the same concerns about the way it's being run.

Failing that, have you proposed any gradual methods of buying you out?  Presumably the business has income, which could be diverted to you over a mutually agreed period to pay you off. Say a year, for instance.  This method is less painful to the others involved, so may be more acceptable.

How much are you due if you were paid off in full today?  How is the valuation achieved?

What line of business are we talking about?