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Failed Business Partnership - What are the Options?

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Sotong44
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Failed Business Partnership - What are the Options?

Postby Sotong44 » Mon, 29 May 2017 1:22 pm

Hi All,

Seeking advise desperately please... Here is my story

I had naively entered into a business with my friend as a sleeping partner years ago. I was given 15% of the shares of the Private Limited Company X. Company X then bought over Company Y and Company Z. I am not a registered director of any of the Company X, Y and Z.

While Company Y is doing ok, Company Z is bleeding badly and we could not realized any profit throughout the years. In fact, we exhausted all the initial cash capital and had to pump in some company loans. I trusted my friend a lot and never once asked for a financial statement throughout the years. I did suspect some amiss and my hubby also warned me to be careful but I was in denial. So my bad and I totally deserved what happened next.

Recently, my friend approached me to discuss cash injection instead of putting in company loans. We have creditors chasing us for debts of Company Z. My hubby did an ACRA search and he found out that somehow Company X no longer owes the profitable Company Y. Company Y now owed by my friend and another of her new business partner. Company X only owes Company Z which is in bad shape financial.

I am very upset and depressed. What are my options knowing that:
1. There is no value in Company X which I owe 15%. In fact it is in debts because of Company Z.
2. Company X no longer owe Company Y. Which I wasn't informed.

How can I clear this mess?
1. Can I legally disown my shares 15% in Company X and give up them all up to my friend? (Major Concern)
2. I understand that I might have to write off all my initial investments, but can I chase back the company loans that I had pumped in (Minor Concern)

Do I have any other options?

Appreciate your advise
Sotong44

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Re: Failed Business Partnership - What are the Options?

Postby Strong Eagle » Mon, 29 May 2017 10:14 pm

You are not a director, therefore you have no standing as a manager of the company. The amount of money you can lose is the amount you invested in the company. You cannot be pursued for any other debts of the company. Similarly, if you have loaned the company money, you cannot be forced to loan it more. In other words, you can walk away from this whole mess without any additional liability on your part.

You have been screwed by a cheat and you are foolish to let that happen to you. You probably have no recourse in the courts. After all, you put money into the company as a shareholder willingly, and then you lent more money to the company, willingly. You cannot say you were cheated when company Y was spun off.

You can, however, sue to have your loan repaid, but it sounds to me like the company is so much in debt, there is nothing to collect. Your cheating friend has done a great job of leaving you with the junk while getting yet another "friend" into company Y.

You would be a fool to put one more penny into the company. As a shareholder, you can file a complaint with ACRA that you have not received annual reports, shareholders statements, etc. These are all required by law. The only thing this will do it make life difficult for your "friend".

I don't see any way that you get money back.

Sotong44
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Re: Failed Business Partnership - What are the Options?

Postby Sotong44 » Tue, 30 May 2017 11:34 am

Thanks Strong Eagle,
You have confirmed my fear that I am not able to do anything about the spun off Company Y. Yet, it is also a relief to know that I cannot be pursued for any other debts of the company although I am holding on to 15% of the company. That is good enough for me and I can sleep better at night.
At least I can move on with my life knowing that I am not liable for the debts of Company Z.
Thank you for replying to me.

Sotong44


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