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  • #999850
    • Total posts: 2

    Hi all,

    In the rare case that there were no financial agreements between directors, no discussion about leaving etc could you tell me your thoughts on this one.
    3 of us formed a company 3 months ago. Three directors with equal shares. No initial funds deposited however two directors paid all the bills (less than $1000 each).
    One of those paying directors wants to leave.
    Should the other two directors reimburse these director loans to the company when that director leaves?
    Varying levels of sweat equity involved too.


    Jason Ramage
    • Total posts: 3,160

    Sweat equity, IMO, is irrelevant as that does not appear to have contributed to keeping the lights on.. Morally, wouldnt the other 2 directors be more comfortable reimbursing what someone has paid out of their own pockets in order to allow the business the opportunity to even contribute the sweat equity in the first instance.

    Jason Ramage | Lucas Arthur Pty Ltd | E: hello@lucasarthur.net.au   P: 61 3 8324 0344    M: 61 412 244 888
    • Total posts: 210

    Did you have any agreements in place regarding equity and what would happen in the event of the business winding down?

    • Total posts: 4,472

    I disagree with Luke on this one, sweat equity should be compensated, especially if it has contributed to the well being of the business. Personally if I was the leaving director I would be looking at the value that my contribution has made to the profits of the business to date, not just what was put in.

    Sounds like you are trying to get out of it cheaply

    • Total posts: 2

    Hi all, thanks so far. No profits, no customers. Next steps are either reimburse director for these investments or loans to the company or dissolve it.

    • Total posts: 1,676

    What do the remaining two stakeholders want to do with the company? It doesn’t sound like any business exists. In other words if everyone is leaving then you’ve done your cash and walk away. You could ask the stakeholder that contributed no funds to reimburse the other two for some of their monies but it doesn’t sound like there is a compelling legal argument if it comes to that.

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