Some three or four years previously Tony had started a business with friends.
Everybody had contributed $25,000 with the idea that when the company got on its feet they would repay themselves this seed capital.
Tony’s father had grown up doing manual labour and Tony, my client, was determined that his children would “have something better than he did” and it was extremely important to him that he recover his seed capital. This was the money he was going to use to send his boy to a private school.
His partners knew he would require his money. So, what happened when he asked for it?
They said that they couldn’t afford it.
After that, my job was to “look at the company and see if there was anything that could be done”.
Two things became apparent.
First, the only way to get his money back was by way of return of capital and this was not possible.
The second reason was that whilst the Company had an annual turnover of 9 to 10 million dollars, there was no money… the other shareholders had been paying expense accounts and upgrading motor vehicles to “grow the company”. It didn’t appear as if there was anything that could be done.
I gave Tony the bad news and sent him home.
But over the weekend I got out the information and looked at it again.
There had to be another way. I felt he was being bullied… and I do not like bullies.
The clue was not in the return of capital but rather the relativity of the loan accounts that had been created. The other partners had large loan accounts and borrowed against their future earnings. My client had been living within his means, still driving the same motor vehicle he had when the company was incorporated.
I rang Tony and asked him if he was annoyed and what he would like to do about it. He listened quietly and said to me “let’s do it”.
The next 9 weeks were filled with requests for repayment of loan accounts, meetings, resolutions and lots of table banging.
End result was that they each offered to sell out. Tony became the sole shareholder and director of the company.
After assignment and reapplication of the loan accounts, total out of pocket to my client was nil.
His first (un)official task was to buy his boy’s uniform for the ensuing year’s (private) school.
