Removing a partner from a business

[Windturbine]

I'll keep this short, one partner in the business is becoming a problem, takes too much financially out of the business and despite several warnings by bank manager and accountant continues to do so and I need it to stop ! There are 4 partners myself, my parents (both in their 70s) and older brother who is the problem. All land, buildings and houses belong to dad and we are partners in the business only, we are asset rich (£10mil +) but cash poor and have a very seasonal cash flow due to seeming to have to wait longer and longer for money from customers(small contracting operation) on top of normal income, grain sales , livestock etc. My question is how would I go about removing one partner from the business, I can't afford to take any legal advice from a solicitor at the moment and I am truly fed up ! I have always just kept my head down and worked and I am married with 2 small kids and older brother has dealt with (or not as the case seems to be) SFP stewardship etc. Brother has children at private school, a wife with expensive tastes and a expensive lifestyle. I know this sounds like the normal family farming situation but the one thing I do not want to do is upset my parents as I only have the upmost respect and their welfare in mind ! Can anyone help on here,by pm or steer me in the way.of someone who can advise me ! We are NFU members if that helps

 

[newholland]

It's very simple - you are the partner who needs to leave. Get Sian Bushel in for a family meeting to negotiate, then give 3 months notice and crack on with your life. Time waits for nobody. Get a job or get a job aboard.

Sian bushel associates is well worth contacting. - she makes things happen.

 

[Renaultman]

It's very simple - you are the partner who needs to leave. Get Sian Bushel in for a family meeting to negotiate, then give 3 months notice and crack on with your life. Time waits for nobody. Get a job or get a job aboard.

Sian bushel associates is well worth contacting. - she makes things happen.

Got to agree with this. Good advice.

 

[Dairyfarmerswife]

Do you have a partnership agreement and does it provide for removing a partner? Are your parents in agreement? Without those two things you are going to need some legal advice.

 

[milkloss]

I think @newholland probably has it spot on although I can’t vouch for the advisor he mentioned. If each of you can’t take an equal share then you’ll fall out so find another way beforehand.

 

[wasted years]

You are inline for a 5 million inheritance.
It is likely your brother is wangling more money out of the business than you without you knowing.
The chances of persuading your parents to throw one child out on their ear is slim IMO.
Tread carefully, 5 mill is lots of money.

 

[Frank-the-Wool]

Do you have a partnership agreement?
If not then the advice above is the route to go down.
Get a good lawyer that will work for no win no fee.

 

[Luke Cropwalker]

If your dad owns everything talk to him about it if you can, he may be feeling the same way.

 

[chipchap]

You must communicate with your partners. Your parents have a lot to answer for in allowing things to get so bad, but are probably fully aware of the situation.

 

[Windturbine]

You must communicate with your partners. Your parents have a lot to answer for in allowing things to get so bad, but are probably fully aware of the situation.

They are aware of the situation and are very upset by it, but father doesn't like confrontation and there has been other things involving another family member that has caused alot of upset for them recently. I do not want to see another family farm destroyed by siblings but I can only see that as the solution at the moment. If the business was dissolved at the moment brother would owe the other partners roughly £250k, we would have to pay him nothing I am truly at my wit's end with the whole thing at moment !

 

[neilo]

Before signing the partnership agreement at home, the family solicitor gave a talk to my brother and I. One of the things I remember him saying, was that if there was no longer any trust between the partners, then there was no longer a partnership, regardless of what documents might say. I always thought that was very good advice.

One thing’s certain, if the OP leaves it, it will only fester and get worse. Better to have a small fall out now, than an almighty bust up a couple of years down the line. It’s never easy though.

 

[Worsall]

Need to upfront with parents. Are you aware of their 'Will'? If the property is to be split 50:50 one day, and your brother's debt does not effect that, just continue to work hard in the knowledge that he has taken his route and you yours.
Personally I think it is a bit of an easy route for parents to just set up a family partnership, as one day it is inevitable that each party will want to take opposing directions.
Certainly do not just walk away, you are the partner that is living within the means of the company profit, and not living off the asset value.
As a side note, some parents do not take well to agents being involved, see it as a personal attack.
Seen and helped with this scenario many times, so good luck.

 

[Windturbine]

Had a discussion this morning with him and put a few things straight, given him 3 months to sort himself out or I will begin a dissolution of the partnership. Trying a sharp shock treatment first

 

[milkloss]

Had a discussion this morning with him and put a few things straight, given him 3 months to sort himself out or I will begin a dissolution of the partnership. Trying a sharp shock treatment first

How that went down and the fall out over the next few days will probably set your path for the future. Well done.

 

[Goweresque]

Need to upfront with parents. Are you aware of their 'Will'? If the property is to be split 50:50 one day, and your brother's debt does not effect that, just continue to work hard in the knowledge that he has taken his route and you yours.
Personally I think it is a bit of an easy route for parents to just set up a family partnership, as one day it is inevitable that each party will want to take opposing directions.
Certainly do not just walk away, you are the partner that is living within the means of the company profit, and not living off the asset value.
As a side note, some parents do not take well to agents being involved, see it as a personal attack.
Seen and helped with this scenario many times, so good luck.

Hang on - the brother might be building up a theoretical debt that means he ends up inheriting less than the OP, on the other hand there's no guarantee that it won't be all smoothed over somehow upon inheritance. I can quite easily see a scenario where he's told 'You've just inherited £Xm of land, why are you trying to get more out of your brother?' The point is the land is land and the cash is cash. Its all very well saying 'You'll inherit £5m' when he won't he'll inherit land worth £5m IF sold. He won't inherit any cash, unless the brother pays his debts at that point, which incidentally can only be done by him selling some of the land. And living requires cash, not land.

Personally I would not continue to work hard so someone else can take cash out of the business and have the benefit of that cash now, while I have to live parsimoniously to try and make the business viable. Put it this way - if both brothers couldn't live like Rockefeller on the back of the business, as it couldn't generate the cash to fund it, why should one be able to and not the other?

 

[mezz]

Had a discussion this morning with him and put a few things straight, given him 3 months to sort himself out or I will begin a dissolution of the partnership. Trying a sharp shock treatment first

IMO this discussion should have been had with all partners present. As already stated by chipchap your parents have a lot to answer for. It is lack of communication that has caused this problem and his dislike of confrontation is no excuse. No one enjoys having the awkward conversations, but not having them when needed is just childish and allows a small problem to escalate. It doesn't need to be a row.

IMO you should point this out to your parents. I don't personally think you trying to tackle the problem on your own will work, but happy to be proved wrong.

You could start by scheduling formal partnership meetings monthly, where the previous months ingoings/outgoings examined and future cashflows and budgets agreed. At least if you do this the other partners can see the precarious nature of the finances and if your brother takes money out of the business witjout agreement there is a formal prearranged meeting to bring it up and have him explain it. If he can't then look to have 2 signatures necessary to write a cheque.

Formal meetings are also good places to ask your brother where he sees the business in 10 years time and how he thinks you will get there. If you can't agree on that then the partnership is finished anyway. If you can agree then put in steps to achieve it. It will more than likely mean he has to cut his cloth.

Its not a solution, but you should make sure the money he takes out reflects a reduction in his share of the partnership in the accounts, rather than just a large salary.

 

[HolzKopf]

For me, the early advice of you leaving the partnership is a difficult road for you to tread - upheaval, change of direction, job, life etc - and it's likely that without your input the farm will start to decline faster and jeoapardise the health of your parents in particular and eventual wealth of the whole lot.
You've taken the first hard step by putting it on the table, build on that but just don't threaten, by the sound of things you all need a plan to buy into and for that you do need outside advice - any grant aid for this available locally? - in order to allow the farm to breathe and build.
Lots of us are asset rich and cash poor. Part of the plan should be for someone to see whether any of the asset base can be utilised to provide additional income or debt repayment. I also agree with some frank discussion with your parents at a time when emotions are lower in order to understand what the plan for succession is on either one of their deaths. This is not like some forgotten great aunt leaving you a couple of grand windfall, what happens to the farm's asset base is key to your survival. If they have any regard for the farm and you and your brother, those decisions should be discussed, committed to paper and then forgotten. Again, a family solicitor or advisor who can mediate or broker these scenarios is vital. I've seen a farm here go this way with elderly parents still 'wealthy' while one other partner struggled, worked hard and watched the other 'more needy' one taking what he thought he was 'entitled to'. They ended up selling of the herd piecemeal, renting land out as pony paddocks and even stripping the peg tiles off of unused buildings. They had no leadership or direction.
Well done for what you've done so far, it takes guts. You've got a £10m backstop, better than most. Don't let it be squandered. Crack on!

 

[chipchap]

I imagine you cannot envisage farming in partnership with your brother in the more distant future when your parents are gone?
If this is the case I would suggest it best if the farm partnership were broken up between you and your brother sooner rather than later, if at all possible.
Your relationship with your brother may well improve subsequently, if the split is carried out fairly. Your parents do not need the grief of a disput in their twilight years.

 

[Lazy Sod]

Ask your brother what he thinks will happen to the farm's finances if you started taking as much out of the business as he does.

 

[yellow belly]

try and find a way to split the land in 2 and keep talking once you cannot talk about the issue the costs can mushroom if outside parties get involve
do you have a trusted family member to all concerned who could mediate a breakup of the partnership an inlaw or good friend of your parents
you farm your half with parents the other half you offer to your brother to farm with parents
if he does not want that then offer to farm his half on contract with your parents paying a sensible rent
your parents will want to see the farm continue and thrive as they have spent a lot of effort to build it in the past

this may be a bit complicated but the big merits are that when eventually your parents pass away you do not have to fall out over the farm when you have lost your parents
if your brother is getting into debt then he must pay back the debt or split the land up to cover the debt

if you farm with your parents partnership should pay rent to the land owners then wages to those that put work into the farm with profits split between partners

this way your parents have a steady income in retirement you have an income for work you do and can expand your side of the business gaining all the benefit of your effort