RSS feedsI hit 45 with little prospect of improving my lot as one of many partners in a provincial office of a major firm, but thanks to a merger and some ‘office rationalisation’ I had an unexpected opportunity to leave and join a much smaller practice in the same town.
An added advantage was that a number of my clients, unsettled by the merger, decided to jump ship as well so I not only had much improved prospects, but a nice platform to build my business.
It seemed I was set for life, but just a few years down the line I realise I might have been better off staying where I was. Having no real experience as a business owner, I failed to look far enough ahead when discussing things with my new partners and did not get proper, written agreements to cover all our arrangements.
On the surface, it might look as though I have been stitched up, but to be fair to them, my partners were equally ignorant of what needed to be considered. The result is that we now have some awkward negotiations ahead.
My partners are now 57 and 61 and had incorporated the business just before I joined them. They had worked together for many years, each running his own client base and drawing profit based on the results of their individual efforts with their clients.
The same arrangement continued when I joined and I suppose we were effectively three sole practitioners working under the same roof.
Now they have suddenly decided that it is time to finalise their retirement arrangements and it looks as though I’ll be expected to fund their exit routes. The older partner expects me to buy him out, while the younger wants a goodwill (valuation) figure for when he departs and to keep earning at his existing level, although he has not indicated a retirement date. We have no shareholder agreement, and no arrangements covering retirement notice periods.
We all own the same number of shares in the business and our rights are the same for votes and dividends. This level of equality was a great attraction to me when I joined the business, but without an agreement to regulate the current developments I might have to take on a liability for the privilege of becoming a sole practitioner in a few years’ time.
Another thorny issue is the valuation of the business. Without a shareholders’ agreement we have no valuation basis for the shares. Since I joined the business the value of my own portfolio has grown considerably as I have brought in a number of very good clients. My colleagues, on the other hand, have been resting on their laurels and although they take care of their own portfolios very well and have not lost any business, they have not brought in any new work either.
Although I have only been here a few years and started with just a few clients, I am now responsible for more than one-third of our fee income. I could, therefore, be further penalised for working hard.
Then there is the problem of our offices. The property is jointly owned and is on the balance sheet, but the funding is personal. Both partners want to sell their property share to me. If I don’t agree to their terms they say they will sell to a third party so I could end up being in business with people I don’t know and with no control.
Even if I saddle myself with a debt there is no guarantee that any of my partners’ clients will stay with the firm when they retire, or, indeed, the staff some of whom have worked for them for many years.
