I'll try to keep it brief. Client runs a successful business as sole director / shareholder. Her partner of 8 years was out of work and they decided to set up company B together, joint directors and 50/50 shareholders. The idea behind this was that the client would provide initial start up funds, down payment on a shop lease, minor alterations etc. then her partner would set up shop (call it a barbers shop) while the client would potentially offer complementary beauty treatments (I have subtly changed their 'trades' for the purpose of posting this).
Client deposited 10k from her (in credit) loan account with her existing company, into the newco bank, as a loan to newco.
It later transpires that the relationship had been 'on-off' for a while and her partner at this point ended the relationship.
The funds in newco have been spent on alterations / rent etc and the shop is now open.
Client's ex partner is now unhappy that client has access to the company bank account and is adamant he wants her to resign as director and 'come off the bank account'. I suggested to the client that perhaps an agreement could be made so that when the loan is repaid, at that point she will remove herself from the company, however the ex is not happy with this.
Client is emotional and is hoping he will come back to her, so in that hope, she doesn't want to involve lawyers and is ready to walk away from the company, which I think is a mistake.
I have of course advised she contact a solicitor but to no avail. She has children to her ex and he apparently didn't pay towards their upkeep, so the chances of the loan ever being repaid are slim.
No written loan agreement exists.
Am I right to advise caution in resigning as director at this stage and selling back her shares?
I think she is being ruled by her heart as opposed to her head and I do have sympathy for her.
Ordinarily she is a head strong, very successful businesswoman, but this seems to have has knocked her off par.
I don't think there is an easy answer here and am just opening this up for opinion.
Thanks in advance