A client has set up a new limited company, they write books and do public speaking in a very niche area and also are launching an online shop. They have a "friend" (their words) who has "invested" (also their words) £200k into the business however there is no agreement and they dont want the money back! The client has issued 10% of the shares to this friend however they dont want to be paid a dividend should the company make a profit (I have my doubts it will ever make a profit but you never know...) so not sure why the shares were issued to be honest to them.
When I pressed the client they said that their friend was "investing in me as they believe in what Im doing"...
Ive got ID for both parties and ran a check which came back fine however do I need to ask from where the funds have came from? The whole thing seems a bit odd but I guess this friend could be a very wealthy individual and does indeed believe in the cause?
Secondly, with no agreeement in place for the money can this be treat as share premium? Ive suggested that the client speaks to a solicitor to get an agreement drawn up but both parties dont need it as they trust each other... (yup, heard that plenty of times before too).
Any pointers appreciated thanks.