Therein lies the problem, I can't drain the company of assets and the only way I can 'protect' myself now is not to credit any more of my side of the business earnings into the shared corporate banking accounts. However, given this scenario, I will be at the losing end again as eventually someone has to pay the bills else we will be forced to go into closure, in which any money returned from the liquidation of our entire business will be 50-50 which is ultimately unfair to my position.Strong Eagle wrote:I'll give you the short answer now, add more later.
Unless you are carrying a "good will" asset on your books, your share value is exactly what is on your balance sheet as net retained assets divided by the number of shares.
Please pardon my ignorance, but what is a 'good will' asset on our books? There was never any legal or black & white written/signed agreement on how the Profits & Losses will be covered by the 2 sides of the business entity. The only mention of shares division is in ACRA which X is using to his advantage.
The original capital injection doesn't mean much, just sets the number of shares each of you own. Were the company to be shut down, you'd each receive proceeds according to the number of shares you own. Can't get around this.
So the 50-50 division in ACRA is really the knockout punch for me? There is no legal recourse for me to seek for more compensation based on the facts & figures that my side of the business has been covering up X's losses and sustaining the entire business entity till now? This is really unfair, sigh.
If you have cash/equipment in the company and are able to withdraw it from the company before any sale, then the value of the shares becomes essentially worthless. This is one way you get your money, assuming you don't need your partner to withdraw money for example.
Unfortunately, there is no way for me to remove the existing installations as per your suggestions. As for the cash portion, I can retain all my earnings and not credit these into our shared Business Banking Account but then, the landlord & others will be knocking on our doors at the end of the month for the rental/utilities etc, and in that event, all those costs + penalty will still be born by the 2 of us, though it will be a 50-50 split which is at least fairer to me since my side of the business is supporting >50% of the monthly operating costs. However, will this arrangement get me into trouble cause I will then be knowingly causing the entire business to go into negative cashflow by not crediting my earnings and can X then use this against me and claim compensation?
Your partner is a dreamer if he thinks someone will buy his shares. Any buyer would look at asset value versus share price... but breaking up a private limited with 2 shareholders just to get at asset values would be very tough.
Therefore, a new owner would be looking for investment upside and risk downside. Given that there is friction between you and partner, a new owner would think twice about investing because you are the income producer and are getting screwed. I certainly wouldn't want to buy into a situation like this... you might just walk away.
With regards to the situation you drawn up, I am in fact pretty intent on staying put and being a co-tenant with this new owner. If the monthly common operating costs (rental/utilities etc) are split fairly, my side of the business is already profitable thus it's definitely to my advantage to not walk away. However, with the current lesson learnt, I will definitely want to get legal documents detailing the fair split of operating costs if this new co-tenancy arrangement were to materialize.
Company share buy backs are just about impossible. Your only other option is to buy his shares yourself... at some significant discount to book value.
I don't think your position is too bad, based upon what you have written. Your partner has essentially illiquid shares that can't be sold to anyone with common sense. You can gradually drain the company of assets. You can form your own second company and have it contract to this company so that you move cash into your own company. You can never pay a dividend, so owning shares does nothing for your partner.
I've been real busy. First, let me say:ck88888 wrote:Hi Strong Eagle,
Sorry for troubling you again on my situation, but really appreciate your valuable advice on this.
Look, there are three ways you can get money out of a private limited (and I am assuming you have a private limited, even though you referred to a partnership). If not a pte ltd, you can stop reading now, because I don't know anything about LLP's.My partner is now 'threatening' me by saying he is going to a lawyer to do whats fair for us both with regards to our business. My last agreement with him was that the decision was given for him to sell his half of the business: but of cause with a lot of Terms & Conditions so that the new buyer that takes over his half of the business will be independent from mine, ie. we will continue to run the 2 services under the same company name, but our accounts (Profits & Losses) etc will be independent to each of our service. And this time round, the agreement will be represented by legal documents in which the legal costs are borne by the new buyer.
That was my last agreement with him, and he mention he will proceed with the withdrawal of his shares from our partnership. Today, when I queried him on the progress of a new buyer, his reply was that he has gone to the lawyers to do what is fair for the both of us? Thus, do you have any idea what exactly can a laywer do for him that is beneficial to him only?
If your AoI contain director or shareholder approval of share sales, you are absolutely in command. No sale can be made without your consent.From his tone, it appears like he sounds confident that this arrangement (through his lawyer) is set to favour him. I will assume that what the lawyer will probably do is to appraise our business in it's entirety (ie. his side and mine) and come out with a figure in which 50% of that figure will represent his shares with which he will then proceed to sell to me or another buyer? However, this is the very thing that I am trying to stop him from doing, which is trying to base the price tag of our business with my side as the main selling point for the good valuation price. Can I also just confirm with you further that, any new buyer will need to have my signature on the dotted line before he can takeover any shares and before I sign, I can lay down all the Terms & Conditions of the partnership with him. If this is the case, I can at least feel more relieved that I am able to block what my partner is doing behind my back without my knowledge!
No problem. Look, you have to remember, the guy is not buying a business... like a sole proprietorship... he is buying shares in a business... and this is a very great distinction. He does not become a manager. He does not become a director. He becomes a shareholder. Unless he has more than 50 percent of the shares he can never prevail in an AGM or EGM to be appointed, hired, or anything... he is a shareholder that doesn't have enough votes.Moving on, iIs it true then that my only recourse now is to start another business entity and transfer all my services (ie. assets) over to this new company and leave my current business with him as an empty shell? In this way, any valuation of the current business won't be good since my end of the service will be essentially worthless after I do the transfer! It seems this is the only way for me to limit him with walking away from this partnership with more than what he deserves. The only reason why I am hesistant to walk down this path is that the transfer will cause a lot of disruptions to the side of my business and also incur additional costs (deposit, laywer fees, renovation etc). Thus, if you may, please kindly advice which is the best route for me at this stage?
Lastly, it seems that I should also engage a lawyer to workout a gameplan for me and thus I will like to seek your assistance again if you have any good (affordable) lawyers to recommend? Also, I tried to PM you but am unable to do so as I have not clocked up sufficient posts. Thus, if you think its better to take this offline, please kindly PM me if you deem necessary.
Thanks so much for your assistance, I understand you have no obligations in helping 'strangers' like me out and the only way I can repay you is through words represented in this forum, but I really sincerely thank you from the bottom of my heart!
Strong Eagle wrote:
I've been real busy. First, let me say:
a) I am not a lawyer
b) I have no idea what your articles of incorporation say
c) I have no idea of what your shareholding percentages are
1) If you do not hold at least 50 percent of the shares you are f*cked.
2) If he does not hold at least 50 percent of the shares, he is f*cked.
3) If you each hold 50 percent of the shares you have a stalemate and you can prevail
Do your AoI require approval before shares can be sold? If yes, and you are 2) or 3) above, your partner is f*cked because he can never sell the shares without your approval.
Look, there are three ways you can get money out of a private limited (and I am assuming you have a private limited, even though you referred to a partnership). If not a pte ltd, you can stop reading now, because I don't know anything about LLP's.
Didn't manage to find anything related to the 'Share Sales' in our AoI, so I guess my partner has the right to sell, but really as you mentioned, the new buyer has to be completely bonkers to buy into something that he has absolutely no powers to command.Finally, this "withdrawal of shares" is nonsense. Shares in a pte ltd exist until purchased back by the company... something that is hard to do... and guess what... requires a majority.
If your AoI contain director or shareholder approval of share sales, you are absolutely in command. No sale can be made without your consent.
If you are 50/50 and no AoI share sale paragraphs are present, he can sell but again, the buyer has to be an idiot if he is negotiating terms and conditions with the seller of shares... all your partner can do is sell shares in the company... and the buyer becomes ONLY a shareholder... nothing more. Your partner cannot sign an agreement that the buyer will become a director or managing director or receive a salary without your approval... that requires a majority vote of the board to add a new director.
Hi SE,Strong Eagle wrote:Any updates?
Hi dnlei,dnlei wrote:hi guys, i am of similar situation with ck.
i am a sleeping partner in a pte ltd with a partner and general partner went missing last few years. Finally made up my mind to totally put this sh*t away by ceasing the company.
@ck: i understand you approached 2 lawyers which come to a solution to wind up, what would be the est. legal fee expected for such service?
i sent my story to my cousin's legal firm and she told me it would cost 20K which is totally exceeded way off what my paid-up capital and my remaining cash balance in the corporate bank account.
@all: assuming if i just wan to break free from the company and striking my name from the registrar and can forgo any cash balance in the corporate bank account. Anyone know of the range for legal fee for handling such situations?
many thanks in advance.
Users browsing this forum: No registered users and 2 guests