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BudgetB


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Rights of a shareholder
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Evening all, long time no speak, hope everyone is well and busy

 

My question - if you have a company that has one director who is also a 50% shareholder, and then a second 50% shareholder who is not a director - and the director/shareholder wants to use one particular firm of accountants, but the 'just a shareholder' is objecting, does the director/shareholder have any sort of ultimate power? Or as it's 50/50 on the shares are they at deadlock?

I think the general question, as it's not just the accountant they are rowing over, is if you are 50/50 in with someone but you are the only director, do you have a greater say in the running of the business?

My personal opinion is yes, due to the list of directors responsibilities, but would appreciate further input please.  They did not draw up a business agreement of any description at the beginning, and now things are getting sticky the whole thing is unravelling quicker than a cheap jumper.

Many thanks.

 



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Jenny

 

Responses are my opinion based on the information provided.  All information should be thoroughly checked before being relied on.

 
Shamus


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The working director has the power that without them the company is worthless (as they are the only one working) so they could use the old "we are doing as I say or you can do the work" approach.

The other director then of course has the ace up their sleeve of "ok, I'm off and I'm taking my money with me".

The business could not survive without the worker, could it survive the withdrawal of the other directors capital?

50/50 on shares with both directors having shares with voting rights is never going to make for an easy life and if both directors have strong views this is going to fall apart very quickly.

love the unravelling quicker than a cheap jumper line.

kind regards,

Shaun.



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Shaun

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BudgetB


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Hi Shaun,

Only one person is a director. The other is just a shareholder. The director/shareholder does all the work etc, whilst the person who is just shareholder invested some money to prop the business up initially. It could survive without the cash, although isn't in a position to pay back in a lump sum what was invested.

yes that is a valid point, without the person doing the work the company is worthless and the shareholder will never recoup his money.

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Jenny

 

Responses are my opinion based on the information provided.  All information should be thoroughly checked before being relied on.

 
BudgetB


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Unfortunately to make it all more complicated the non-director shareholder is holding the bank account hostage and wont allow the director access!

People do get themselves in a pickle!

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Jenny

 

Responses are my opinion based on the information provided.  All information should be thoroughly checked before being relied on.

 
Shamus


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Doesn't show great business accumen by the working director there!

Of course, the working director could open another bank account and have all income go to that one leaving the other bank account with all of the standing orders to wind down the sleeping partners money until they play fair.

The shareholder would still have the right to their money but it would now all be in an account owned by the director.

All in all looks a complete disaster and another pending disolved company just waiting to be put back on the shelf.




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Shaun

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BudgetB


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That was my thinking, but had wondered if there could be legal ramifications of that. The money would still be owned by the company so nothing is being 'stolen' but I doubt the shareholder would be amused!

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Jenny

 

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Shamus


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And currently I would imagine that directors not very amused.

But if the shareholder wants to declare war then it's not the directors fault that they are forced to resort to such tactics to attempt to keep their business going (and they do have a fiduciary duty of care to do everything in their power to do just that).

This is going to end really, really badly. Probably in court.

Might be a good idea to avoid giving any specific advice beyond advising the director to seek legal council.

The above comments would be my personal approach rather than what I would advise a client to do as I could see that such advice could come back to haunt us.



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Shaun

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BudgetB


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Yes, I also see a court case looming unfortunately. Appreciate your opinion on this, which is taken as just that.

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Jenny

 

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RuthA


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I don't know the answer, but have a few thoughts. Maybe check the Articles, incase they include anything helpful?The director owes his duty to the company, not the members, and appointing the accountant would fail in his remit but is it genuinely a case of just one director or is the second shareholder a shadow director? It sounds like he probably is?

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BudgetB


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Hi Ruth,

The shareholder wont let anyone see the Articles, however I suspect they will just be standard version that Companies House provide. Yes I guess you could argue that the shareholder is shadow directing, however of his own making by holding information to hostage. He was only ever meant to invest money but has managed to get himself into a position of ultimate power and is treating the actual director as an employee.

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Jenny

 

Responses are my opinion based on the information provided.  All information should be thoroughly checked before being relied on.

 
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