Legal Advice needed: Urgent help

[Jackdaws]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

Spend the money, get a lawyer. There are lawyers who only specialize in agreements. Make air tight clauses. Register the document. That's very important.

Importantly, what are the conditions of profit sharing. You do realize it is very easy for a business to show losses in perpetuity or show negligible profit while claiming to put income back into the business as investment. Because income and profit are two different things. You must also include a clause to have full access to accounts at all times.

Is she bankrolling the entire enterprise? Then ideally I recommend starting the business in her name and making a conducting agreement where the loan taker conducts the business for 12 months and at end of 12 months if he can pay "X" amount, she is obligated to sell the business to him. That way she retains the title till he clears the loan.

 

[My-Analogous]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

Put few witness signatures and also put in written that he is signing this agreed with his own free will and no body pressured him to sign this agreement. Also while he is signing the paper make video so that you have visual proof that he is not drunk nor have any pressure. Plus notary attestation will be more good.

 

[Maarkhoor]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

This is not a simple loan but an investment, take my advise and go through with the proper lawyer and make the deal otherwise I have plenty of examples where people suffer because of such deals especially in USA and U.K.

 

[Nefarious]

Get a solicitor to draw up the contract

 

[mastaan]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

Zaki, a few quick points for consideration (and i am keeping it to bare hygienic ones) - Am assuming the amount is material and therefore points are reflecting that

1. Take the law of the state where your aunt is, not where the loanee is
2. Is there a security? Presume it is English law, so collateral or security for the loan will be handy? She should at the minimum as the purchased shop as the first security
3. Depending on her preference - Check if you can make it a recourse loan (i.e. if the shop fails, in a non recourse loan, your aunt will have no other recourse to recover her money, but in a recourse loan, she can force to attach the person's other properties)
4. There should be some representations by the person taking the loan (that he rightfully owns the property, that he will not add further loans or indebtedness, that he will not take money from the company before the loan is repaid)
5. From a tax perspective, a no interest loan will create problem for your aunt - So, there should be an interest rate and if the person missed the repayment schedule, the repayment interest should really become punitive (i.e. assume the base rate was 5% - in case of a default it goes straight up to 15% pa, compoundable monthly) - this is a classical US debt ratchet mechanism - nothing outlandish about it
6. Depending on the amount - if it is anything more than 50k, i would strongly recommend a local attorney to look at it - would cost 500-100 USD - but well worth it

i can add a laundry list, but given that this is a friends situation - at least ask for the base hygiene conditions

Sorry, and last point - YOUR INSTINCT IS CORRECT - No money without a contract, if you love her. simple as that.

 

[Trango Towers]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

Simple question....

If things go tits up and here they will for sure.

Which courts will u use. UK or Pakistan. He will be in UK and business in the UK. So I guess has to be UK courts. Does your aunt have capacity to fight a legal case in the UK.
What are the guarantees if he doesnt pay the loan. If there are none. You aunt can kiss her friend good bye and the money also

 

[mastaan]

This is not a simple loan but an investment, take my advise and go through with the proper lawyer and make the deal otherwise I have plenty of examples where people suffer because of such deals especially in USA and U.K.

This is not an investment.. He is investing nothing and asking her to take money from profit of business. No one would do such a hybrid deal in US. This is better done as a debt deal, with senior security over the property invested.

if this is an investment, then there should be a Share Purchase Agreement and that is a pretty handy document with every lawyer - however she should not become a shareholder in a business that she is not running herself. she should do this as a loan, if 'principal' protection is the intent.

 

[Trango Towers]

Zaki, a few quick points for consideration (and i am keeping it to bare hygienic ones) - Am assuming the amount is material and therefore points are reflecting that

1. Take the law of the state where your aunt is, not where the loanee is
2. Is there a security? Presume it is English law, so collateral or security for the loan will be handy? She should at the minimum as the purchased shop as the first security
3. Depending on her preference - Check if you can make it a recourse loan (i.e. if the shop fails, in a non recourse loan, your aunt will have no other recourse to recover her money, but in a recourse loan, she can force to attach the person's other properties)
4. There should be some representations by the person taking the loan (that he rightfully owns the property, that he will not add further loans or indebtedness, that he will not take money from the company before the loan is repaid)
5. From a tax perspective, a no interest loan will create problem for your aunt - So, there should be an interest rate and if the person missed the repayment schedule, the repayment interest should really become punitive (i.e. assume the base rate was 5% - in case of a default it goes straight up to 15% pa, compoundable monthly) - this is a classical US debt ratchet mechanism - nothing outlandish about it
6. Depending on the amount - if it is anything more than 50k, i would strongly recommend a local attorney to look at it - would cost 500-100 USD - but well worth it

i can add a laundry list, but given that this is a friends situation - at least ask for the base hygiene conditions

Sorry, and last point - YOUR INSTINCT IS CORRECT - No money without a contract, if you love her. simple as that.

Point 5 is incorrect bro. I have lent money to my company at zero rate to buy property. There is no tax problem. Yes business in the UK. It just has to be transparent. If tax man insist which he wont the rate can be a peppercorn. I.e. nothing

 

[LeGenD]

Hello

Basically my aunt is giving loan to one of her friend's husband who wants to buy a shop in London. He promises to return the money after 12 months and also promises to share agreed amount of net profit with my aunt who trusts her a lot.

Now she wants me to bear witness of this transaction but as usual I am sceptical about all such transactions outside family so I insisted her to have a written agreement so that she has some sort of proof that she lend her money to her friend's husband. I have also convinced her to do bank transaction as she was about to hand over the money in cash. It's not a small amount but she somehow managed to arrange cash. Now I insist her to have at least the basic agreement something like this

But what is the legal value of this agreement? What can she do to ensure that in case he refuses to pay the amount she has some sort of authority to demand her money back.

PS: Please do not come with posts like she shouldn't lend money, it's not right, whatever... as it's beyond my control. The money is going to her friend's husband and I have already tried to change her mind, but in vain. My job is to witness the transaction but I have forced her to do bank transfer + written agreement. I wanted it to happen through some sort of solicitor or legal channel but I am not sure if they take such cases. The money will be handed over today so I thought why not ask from friends before its too late

Thanks for advice

1. Make this deed LEGAL by consulting a "stamp paper seller."

Stamp paper seller can guide you in this regard. Procedure will take some time but it would be worth it.

2. Pay the sum in the form of cheque (avoid cash); make an excuse that a large sum of cash will attract unwanted attention.

 

[mastaan]

Point 5 is incorrect bro. I have lent money to my company at zero rate to buy property. There is no tax problem. Yes business in the UK. It just has to be transparent. If tax man insist which he wont the rate can be a peppercorn. I.e. nothing

You will get into trouble if the tax assessor is aggressive. Don't think this is a place for us to debate, but i believe it should be simply checked by him - I have seen non arms length loans get into trouble. Plus a shareholder loan is slightly different than a pure debt on business where you are not a shareholder. However, it depends on amount, length and type of business (for visibility purposes).

1. Make this deed LEGAL by consulting a "stamp paper seller."

Stamp paper seller can guide you in this regard. Procedure will take some time but it would be worth it.

2. Pay the sum in the form of cheque (avoid cash); make an excuse that a large sum of cash will attract unwanted attention.

You don't need stamp papers for contracts to be effective in West. I know we use them in India and Pakistan to be registered

 

[cleverrider]

It's £50,000 for 33% share for 1 year when he promises to return the entire sum to retain 100% share of his business

Shop business is very risky, My mate uncle bought a restaurant, coud not pay rent after few months. Closed down within a year.

 

[mastaan]

It's £50,000 for 33% share for 1 year when he promises to return the entire sum to retain 100% share of his business

Then do a convertible loan man.. much easier than being shareholder and get stuck with capital gain taxes stuff at exit (when he pays back)... or may be i have done too much debt in my life

 

[Keysersoze]

Simple question....

If things go tits up and here they will for sure.

Which courts will u use. UK or Pakistan. He will be in UK and business in the UK. So I guess has to be UK courts. Does your aunt have capacity to fight a legal case in the UK.
What are the guarantees if he doesnt pay the loan. If there are none. You aunt can kiss her friend good bye and the money also

Yes this is the point. A contract in the US will have to be presented in the UK at a UK court. If you can't pursue it in the UK then that contract is useless.

 

[khansaheeb]

No guarantee you will get your money back even with legal paper work. You can take him to court but court can't enforce order , worst can he can file for bankruptcy.

 

[313ghazi]

@Zaki tell aunty ji to cool her jets. Blag her if you have to. Say the bank want to see paperwork for such a big transaction. Delay it until you sort out the paperwork.

I'm not sure what validity backdated paperwork will have.