Advice on Who Is Best to Look over The Financials of a after Party Investment?

Just looking for a bit of advice on the direction I need to have someone review some financials for me

Friend owns a event business and hosted a few after parties. I stupidly invested 10k in early 2018
I have been told there is significant loss (around 5k) and he will provide financial reports this weekend
States he has put my money into another party to gain some back (no contract in place)

I get it, i'm stupid and read it all wrong. Is there any possible way of him drawing up numbers to increase the loss, is there someone who can check the validity of this?

Comments

  • +3 votes

    You need an independent third party to draw up the financials…. not the 'dodgy' mate.

    • +2 votes

      It's an events business hosting after parties. I'd be surprised if there were even enough verifiable docs to work with.

  • +3 votes

    ??Did you loan him the money or entered as capital (either as partner or shareholder), is there actually any paperwork involved? Or did you just give him the 10k and he promised he will somehow split the profits with you?

  • +8 votes

    I've worked in finance for many years, these sorts of situations are painfully common. I won't berate you about how stupid your decision was, because I think you get that part, but you need to have some agreements before you start giving money to people.

    For example, can you answer the following questions:

    1) When you "invested" money into your mate's business, did you invest equity or were you lending him money (debt)?
    2) If debt, what were the terms (interest rate and loan term)?
    3) If equity, what proportion of the partnership (as I assume this business wasn't incorporated) do you actually own?
    4) What agreements were in place about the control of the partnership? Did you just invest money and told him he can use it however he likes?

    Basically, you have next to no recourse here. Government regulators are not going to care about a business organising after parties, nor are they going to care about a dispute over $10k. Your only course of action would be to take this to a tribunal (small claims court). Whether you have a case or not is difficult to say, but this is something you'll have to get legal advice on.

    In regards to the balance sheet he sends you, it's practically impossible to validate any claims on it without further information. As long as the balance sheet balances (i.e. A + L = E), you'd have to be able to check every entry on there which is impossible to do without further information. E.g. how do you know he's being honest about his ticket sales number or how much he paid the DJ…etc.?

  •  

    You have had a very detailed response above which is very good. My 2 bobs worth would be to wait until he gives you the financials. See if he would email it to you. Once he does that, depending on what the email says you may have a better chance to bring in a claim. However if he doesn’t sufficiently gives any reasons for sharing the financials, ask questions like apart from you how money other partners invested in the business. A reply might be a good starting point.
    Agreed a written contract is the best, but contracts can exist without the written word. Usually it is difficulty is to establish the terms of such a contract.
    I hope that your friend is not on OBz too looking at the post!!

  •  

    Since you didnt enter into any kind of partnership or set a contract, your "friend" can claim it was a gift or an interest free loan with no terms for repayment. You will need to talk to an accountant to review financials, and a solicitor for the legal side of things.

  •  

    I have been told there is significant loss (around 5k)

    Check how much he is drawing out of the business as wages. Unfortunately your investment could have boosted his wages by $10k last year. :(

  •  

    Assuming the financials will be unaudited then yes, he could essentially put anything in there. He could have stolen your $10k and will put it under "Alcohol expense" or something random in his financials.

  •  

    For me the fact that he said he 'put your money into another party' indicates

    1. He still feels some semblance of owing you money. This will fade over time as he justifies his own lies to himself.

    2. You money - some or part of it still remained - likely as taking a from the last party. It's gone now.

    3. He is undoubtedly having a ball at these parties

    4. If he is running parties he likely has alot of unpaid liabilities. Yours are just one. Some are to men scarier than you.

    5. You have no chance of getting your money back by asking.

    6. He must have BEEN a good friend if you have him 10k. Sorry for your loss.

    Options: Sue him for assets if he has any; Steal his shit; Bikies;

    Or

    Offer to run financials for the next party and ensure he doesn't buy sluts and coke.

    •  

      Most of what you're saying isn't really making a lot of sense:

      He still feels some semblance of owing you money. This will fade over time as he justifies his own lies to himself.

      Based on what OP says, the money was invested as equity, not debt. Therefore, the guy doesn't owe OP anything.

      You money - some or part of it still remained - likely as taking a from the last party. It's gone now.

      The moment OP bought the equity, it is no longer their money. They now partly own the business.

      If he is running parties he likely has alot of unpaid liabilities. Yours are just one. Some are to men scarier than you.

      Not debt, so not a liability.

      You have no chance of getting your money back by asking.

      Not debt, so you can't "get your money back", you can only sell out your equity to someone who is willing to buy.

      Options: Sue him for assets if he has any; Steal his shit; Bikies;

      I agree that suing him is likely the only recourse, but not for the reasons why you would be suing him. You are not suing him to recover your money because it's not a debt.

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