If I bought 10% of a company that is not officially registered but we signed partnership agreement, how do I get my money back?

UPDATED: Sep 30, 2022

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If I bought 10% of a company that is not officially registered but we signed partnership agreement, how do I get my money back?

The company is founded by 2 friends. I decided to invest for company’s further development and was promised that company would obtain all the legal papers. The company has an office where the CEO spends most of his time. I was promised to get 10% of the company’s profit. But company doesn’t function sufficient. No profit at all. I was promised to get my money back by CEO. However, I got nothing except of empty promises. The evidences that I have is the partnership agreement (Russian language), private facebook and whats app messages.

Asked on November 22, 2015 under Business Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

In theory, if the company has violated its obligations to you (which, however, may be difficult to prove if you do not have a written agreement in regards to the obligations--i.e. as to what you invested, what you get in return, etc.), you can sue to recover either your investment or to get from them the distributions or profit you should have received. You can sue on the basis of breach of contract, including an oral agreement; on the basis of fraud, if you were intentionally or knowingly lied to in order to get you to invest; possibly on the basis of "conversion" (a type of theft; taking money entrusted to you); and if you are now supposed to be an owner of the company, on the basis of breach of fiduciary duty--the duty that the majority owners owe to minority owners. If the company is, as you write, a partnership, you sue the other partners directly (there is no separate legal entity, as with an LLC or corporation, to sue).
That said, you are unlikely to ever see your money. Speaking as a former SEC attorney, as well as a lawyer who recently had a client come in with an almost identical fact pattern, I can say very confidently that you were scammed; that there are no busines operations; that the money has just been taken by the partners; and that if you sue, it is likely that the money and the partners will disappear (e.g. to Russia, which is what happened to my client's money and business partner) or that even if the partners don't actually disappear, that  you'll get a judgment but be unable to collect because you'll never be able to locate sufficient assets to collect from.

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