legal, partnershipScenario: A preschool business partnership based in South Africa.
Our children go to a preschool that hit financial difficulties due to residential rezoning, which forced them to move which cost a lot of money. They received funding from a mutual friend of the school, but after the mutual friend’s wife became terminally ill he demanded the money back and was granted an emergency summary judgement by a local magistrate forcing the owner of the school to pay the money within 7 days or they would sell the school.
The owner approached us with an initial offer of an ‘investment loan’ put together by her financial adviser and asked if we knew anyone who would be willing to do some form of bridging finance. After speaking to some people and getting no interest and being concerned that our children’s school would close we provided the necessary funding.
The owner then asked if we wanted to become partners in the school since her current partner had decided that she just wanted to be a teacher in the school and not be part of the business side of things.
We accepted a 45% share in the partnership but for only around 1/3 of the money we put in. The remainder would still be a loan that the school had to pay back.
Towards the middle of last year our own business hit a bad patch. We approached the school regarding our school fees which we couldn’t afford anymore to which we were told not to worry because we had a vested interest in the school.
The business partner had started deducting our school fees from the loan amount she paid back every month so we considered this to be a fair trade whilst we get our business back on its feet.
Two months later we received a legal letter dissolving the partnership and since then we have been bullied by the partner’s lawyers. We put up a fight with the partner refusing to accept her terms which included our immediate withdrawal from the business and converting all invested amounts into an interest free loan.
On February 16 we received a letter from the school expelling our children due to their school fees not being paid (even though it was being paid by deduction) and they stopped paying back the loan. Our legal adviser told us to take our kids back to the school since the partner didn’t have a legal leg to stand on. When we arrived at the school, a lawyer was waiting for us and threatened us with a child abandonment order amongst other threats.
We attempted mediation but the partner refused stating that it was too emotional for her to go through.
Here’s our situation:
The law, I’m afraid, only serves the party who has the most money by the looks of it. If my business were back up to where it was I would gladly sue and make sure this partner doesn’t get away with our investment/loan.
Having said that, what other options do we have? We’ve been advised by a number of people to simply accept the terms and walk away.
Only thing near to advice I have to you is to get your priorities sorted out.
Put your feelings aside and evaluate each option for worst, best and likely case. You might not like the outcome, but I think damage control might be the right way here.
That having been said, ask your lawyer if there is a way to postpone the fight - like signing now and suing in two years. Gather evidence now then maybe you can decide later.
Tbh. that’s a though situation you got there. I know a few things I’d try, but none of them is going to have low legal costs and/or providing a fast solution.
All content is licensed under CC BY-SA 3.0.