[Question] CC Membership

[idube]

Hi there!

I registered a CC about 4 years ago. The business was and is relatively successful. I took on a partner in 2009. Since then things have not been good between my partner and I(we now share 50 50 of the CC).

What are my rights here? As a 50% shareholder who only joined the CC 3 years after it was registered, is my partner entitled to 50% of the value of the company?

Any help would be much appreciated!

[wynn]

Is the partner registered in the cc as a member?
if not he is in partnership with you so get a lawyer to get you out.
if he is then either he resigns his membership or you do after negating any cessions you may have signed.
he would be entitled to any cash he put into the cc and 50% of any increase in the assets since he joined.

[Dave A]

he would be entitled to any cash he put into the cc and 50% of any increase in the assets since he joined.

I'm not so sure of that - that sounds like accrual which is more applicable to marriages.

Someone with a 50% share in a company (including a cc) ordinarily owns 50% of the assets and liabilities unless there is a partnership agreement that states otherwise.

The new partner should have bought in at a fair value at the time he/she bought their stake. Same applies at exit.

Just how fair value might be calculated could be hotly contested if that isn't covered in a partnership agreement.

[sgafc]

Is the partner registered in the cc as a member?
if not he is in partnership with you so get a lawyer to get you out.
if he is then either he resigns his membership or you do after negating any cessions you may have signed.
he would be entitled to any cash he put into the cc and 50% of any increase in the assets since he joined.

Dave is correct. It is not just a matter of paying the partner his cash he invested and getting rid of him/her. The partner would be entitled to 50% ofthe net worth plus capital growth.

For all CC's with more than one member, Association Agreements should be drawn up, to avoid problems of this nature. 50/50 partnerships are also precarious since there is no "majority owner".

The saddest ramification of sceanrio's like this, is that a "weak partner", is still entitled to 50 or whatever percentage of a business he did not work for.
It is a sticky situation, believe me. Unless a buyout price can be negotiated with the said partner.

[idube]

Thanks very much for the quick and helpful replies! Just one thing I'm still not clear about...the partners are entitled to 50% of the nett worth but would that be applicable from before the partnership became active i.e. once my partner joined - does that mean that he is entitled to everything the company made before his membership too?

[BusFact]

Thanks very much for the quick and helpful replies! Just one thing I'm still not clear about...the partners are entitled to 50% of the nett worth but would that be applicable from before the partnership became active i.e. once my partner joined - does that mean that he is entitled to everything the company made before his membership too?

Essentially yes.

Your partner owns 50% of everything: Assets, liabilities, profits ....

When he joined he paid something to buy 50% of the cc at that time, so he bought all your results (profits and assets) up until then.

He is entitled to whatever half your cc is worth right now.

To complicate matters further, he does not necessarily need to settle for just 50% of nett worth. There are different ways to value a cc. For example he might say he wants to be paid for profits he would have got over the next 3 years had he not sold! This is in addition to the nett worth.

It now comes down to negotiation seeing that you don't have any agreement on who gets paid what when they want out.

[Dave A]

It now comes down to negotiation...

I really felt the need to reinforce that!

Without a prior agreement that deals with valuation in a situation like this, it is all about negotiation.

[idube]

CC Ownership options

Hi There!!

I posted a question a while back asking about 50 / 50 split in a CC and my options as the founder with regards to ownership in an unpleasent working environment. I am looking at giving my partner options to leave the partnership- leaving me as the only member- can you help me with ideas on how to do this without putting myself in a compromising situation? what are his options and mine other than just buying him out? I started the organisation and it was running for about 2 years before he joined.

Any help much appreciated.

[Dave A]

Hi,

I moved your post into the same thread you were referring to as I thought the previous information would be important for anyone trying to assist with your current question.

[BusFact]

The fact that you started it and ran it for 2 years has little value now I'm afraid. The assumption is that the new partner paid for this value when he bought his 50% share. If you chose not to get full value from him then that is unfortunately your loss.

The only real option other than buying him out is to let him buy you out and you go and setup up something from scratch again. The simpler option of course is to rather buy him out. Its now just all about how to convince him to accept your offer and price. Its down to negotiation. Bargaining advice is difficult to give without knowing your individual situations.

Good luck