Hi Please can you offer some free advice on the best way to recover a debt from a limited company. 

I will try and break down the issues I have had, and hopefully it will be enough information for you to comment on. Please do bare with me as their are a couple of avenues that need to be stated. If you need any more information, please do let me know through either a PM or by reply posting.

The Story to date…

1. I am a graphic designer that was contracted to work for a new start up company.

2. The Start up company had a new product idea (for fashion accessories) that needed to be worked up from initial ideas through to final product. I was employed to create designs for patents, products, website, packaging and marketing communications of the new product.

3. Initially, the company paid me after I submitted invoices.  The company then came into a cashflow problem and could not pay me so we came to a personal deal where I exchanged an invoice of £2800 for a 1% share of the company. 

4. The 1% share of the company was sold to me with my understanding that I would own 1% of the company shares, including assets, and patents for the idea.

5. I continued to work for the company and submitted new invoices, these were again paid, after the company received investment from new shareholders.

6. The company then fell into another cashflow problem and again stopped paying my invoices.

7. At present – I have outstanding invoices in the region of £6,000 that have not been paid. I have been waiting payment for well over 1 year now.

8. If I am persistent; I am able to communicate with the company director, who is assuring me that I will be paid when they can make sales of their new product. Unfortunately, this is said every time I call, and yet no sales or payments are being made on their half.

9.  From my understanding, the company is trying to agree territorial deals with major retailers across the globe to secure sales of the product.  I understand that this can take some time to conclude, but this also does not help me in getting paid.

10.  In recent conversations with the company director, he has advised me I have three options on recovering the debts owed. these are:

10a. Wait until he gets a deal secured; This could take another 6 months and is not guaranteed to actually happen, (If it does not happen, he will fold his company leaving me with nothing.)

10b. Take him to court (to which he has suggested he will add a spanner to the works by paying me £10.00 after he has received any legal documents and consequently making the legal documents invalid [due to the documents suggesting he owes £6,000; when after paying me £10.00 he would actually owe me £5,990.00]) – He has suggested that if this does go to court, he will fold the company and leave me with nothing.

10c.  That I can be paid in 'old redundant stock'; I would then have to sell this stock myself to recuperate some money. (If this option is taken, and he does indeed secure a deal later down the line, I would not be allowed to return the stock in exchange for money)

10d.  That I swallow the loss and stop chasing him for money.

 11. I have also recently found out that the shares I purchased for £2800 did not include any of the patented ideas (He has told me that these were all patented in his own name and not his companies name, this is so if needed he could close down the company and not lose the patents.  He would then open a new company and use the patents to create the product again)

12.  I understand that the director has several debts with other people (I believe these to be in the value of £40,000) as well as some of his (now unemployed) staff not being paid wages for 2 months.

13.  I have been promised several times by the director that he will pay me the money he owes personally if things do not work for his company.  I do not have this in writing but I may be able to get witnesses that can agree to this (ex staff and an ex director)

My questions to you is which is the best way to go.

a) If I take the company to court, he will fold the company.

b) If I wait for his sales to pick up and this is not realised then he will fold the company.

c) If I take redundant stock then I will have to input more time in trying to sell the stock and I am not guaranteed to make any money back from this. 

d) How can I claim miss selling of shares as they do not include any patents

e) Can I force other shareholders to pay the debts owing

f) Can I force the company director to make good on his promise of personal payment even though I do not have this in writing.

As a further note; I believe the company has made only minimal sales in the last year partly due to ongoing discussions with territorial agreements, territorial agreements falling through and new agreements put in place, a change to the products packaging design and lack of funds to get the product produced without capitol for production.

The company director is now working a second job to survive, and will not pay me any money from this second job as he now insists it is the company that owes me the money and not him.

The product he is trying to sell, and tie into agreements with distributors has not been paid for and so technically still belong to me.

Many thanks for your time in reviewing the above. I am very grateful for any help or advice you can offer. If you do need me to give you more information please do let me know. 

Regards

Jahjah