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Director stealing money

Discussion in 'Legal' started by indigomez, Jun 11, 2011.

  1. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    Hi everyone.
    I am one of two directors of a small LTD company. Each director has a 50% share and we formed the company together in 2008.

    It has come to my attention recently that the other director has been getting payments made directly into his personal bank account. The only evidence I have is an email exchange.

    I've suspected him in the past of similar behaviour, but haven't had any evidence to confirm it until now. It took a lot of time and money to get the company going, and I don't have the finance available to start from scratch again, so I would prefer to have him removed somehow. Although having read some posts on here, that seems to be a costly option.

    I just need to know what my options are, please. Any help would be greatly appreciated.
  2. NickD

    NickD UKBF Newcomer Free Member

    Posts: 47 Likes: 6

    I have just read your post and have to say that almost exactly the same thing happened to me 10 years ago!

    In my case, one Director asked us (other shareholders and directors) to sign a new bank signature mandate as they were (in his words) digitising the signatures. We all (yes, naively) agreed and did so. He then took the mandate home and got his wife to sign in another column after ours. We then had a total of £96k taken from our account, and at the same time he acquired a new house, second car, horse for his daughter, expensive holidays etc....

    In your case, you could request a formal review of the company finances, and if he refuses you could obtain a judgment through the Courts to prevent him from failing to disclose this information. If, after your investigations, it appears that money has been taken without your knowledge, your solicitor should advise you of the way forward. Depending upon the method he used to obtain the money, it could be theft or fraud. Either way, these are criminal matters.

    I must point out that I am not a lawyer, I have just had a similar experience!

    I wish you the best.
  3. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    Thanks for your response.

    Aside from our main area of business, we also get commission from other companies by passing leads (that are of no use to us,) to them. What this director has been doing is getting these companies to pay the commission they owe us for these leads directly into his bank account.

    He hasn't been declaring the leads on our database either, so if you looked at the database you would have no record of the lead, let alone any record of a kickback from it.

    It's only because I've seen some of his email exchanges that I'm aware of the leads and the money he's taking.

    So would I need to obtain a judgement through the court for him to produce his personal bank statements to prove it if the email exchanges aren't enough?

    I will be going to a solicitor, but would like a rough idea of options and what to expect before I go forward.
  4. NickD

    NickD UKBF Newcomer Free Member

    Posts: 47 Likes: 6

    Yes, this does look a little more complex now you mention it.

    Firstly, you need proof that this is happening, or at least has happened in the past. He no doubt will deny that this has ever taken place. Getting a Court order for him to disclose his personal accounts to you would be bordering on the impossible. You need to take a copy of his email messages. Make sure that these messages are company business messages and not his own personal ones though! Also, do carefully consult your Heads of Agreement between yourselves (and I hope you have this in place) to see what has been agreed regarding personal remuneration and conflicts of interest, as appears to be the case here.

    Seek professional advice through a lawyer who is well practiced in such matters (someone who deals with corporate law). Be prepared for some serious expense though! If the lost revenue is likely to run into serious amounts of dosh, it may well be worth doing. Otherwise, just put it down to experience and put suitable controls in place within the company to prevent it happening again.

    Best of luck!
  5. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    Having done more research, I'm certain the cost of pursing this would not be feasible.
    Whilst what he's taken isn't a huge amount, I don't wish to be in business with someone so untrustworthy.

    The website is owned by myself, and not the company. If I was to leave (let him buy my shares), could there be a problem with me taking the site with me?
  6. empirecanvasprints

    empirecanvasprints UKBF Newcomer Free Member

    Posts: 25 Likes: 6

    If you could prove the website is not in the businesses name then you might have a chance but this may be complicated as its being used for the business.

    Are you a member of the FSB you can get free legal advice 24/7?
    • Thanks Thanks x 1
  7. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    I didn't know that about the FSB. I've joined up now.
    Thanks for letting me know.

    What a headache this all is. Hopefully I'll work out a suitable solution.
  8. crphillips

    crphillips UKBF Regular Free Member

    Posts: 717 Likes: 166
    We had something similar happen around 3 years ago. In the end the shareholders activities cost us the business and around 330k!

    Unfortunately the way the law works is your average guy trying to do right gets shafted and it ends up too costly to pursue the crooked party.

    We spent around 10k on solicitors and got nowhere. We had very good solicitors too.

    Usually the more crooked they are the more money they have to fight you. They can use all sorts of tactics to drag it out and cost you more money.

    The only thing i learnt from the whole thing is that i should have walked away and given up a lot earlier than i did. The crooks always win is the message i've learnt!

    Sorry to be so negative about it but unless it's a big amount and you have stacks of evidence and plenty of money to fund the lawsuit in the meantime then i wouldn't bother. I've also learnt that contracts are meaningless unless you have the money to go after someone who defaults on the terms.

    What kind of money do you think he's stolen? Hundreds, thousands, 10's of thousands?

    How much spare money do you have knocking around to pay the solicitors?

    Without any figures it's hard to say what to do but i reckon your priority would be to get him out of the business but to forget going after the money he's stolen.
    Last edited: Jun 12, 2011
  9. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    crphilips, as sad as it is, I know you're right.

    I have proof that he's taken a couple of thousand recently, and I'm aware of some other discrepancies, so I know the reality is even higher, but I'm not really interested in getting that money back. I just want to run the business without him.

    The problem is I don't really have the money for any substantial legal action and he's a director and a shareholder with 50%. There's not a chance he would agree to sell his shares, so I'm unsure what to do.

    90% of business is brought in by our website, which according to whois is owned by me (as I built it, wrote the content and optimised it for the search engines.), but the domain is the company's trading name, so if I left and took the web site I may well be leaving myself open to some problems.
  10. crphillips

    crphillips UKBF Regular Free Member

    Posts: 717 Likes: 166
    I really feel for you. It's a nightmare. We came so close to loosing everything and fortunately due to a lot of hard work and stress we pulled through. I don't envy you but at least we're only talking about a few grand here and there. The important thing is to get him out of the business.

    You've got to play these people at their own game. Look at all of your options and seek some help but don't put too much money into it.

    Without knowing what your business is and what you do and how you do it it's hard to give any advice but i understand that you need to stay anonymous.

    Could you start gathering evidence on the sly? Can you contact the customers and check the bank account details they are sending the money to and get copies of the emails that gave instructions of where the money should be sent?

    Do you get on with the other director? How much money have you invested into the business?
    Last edited: Jun 12, 2011
  11. indigomez

    indigomez UKBF Newcomer Free Member

    Posts: 6 Likes: 0
    At present the other director has no idea that I'm on to him. We've always got on well and have known each other for about 6 years. Nearly 4 of those years in business together.

    The money is being sent to him by other companies as commission payments for leads we've provided to them.
    If I contact the companies to ask what account they're sending it to the director in question would find out pretty quickly. I do however have proof - an email exchange with him asking that they pay into a bank account, which turns out is his personal account. The emails also have the other party confirming that they've sent the payment.

    Like I said earlier, this is a small business, so even though what he's taking may not seem like a massive amount, when compared to our general finances, he's taking a monthly salary's worth of payments at a time, on top of his usual earnings.
    I only have proof of one exchange at the moment, but I am witnessing others being prepared.

    So even if I don't bother pursing the money he's taken, unless there is a cost effective solution available to have him removed as director/shareholder for stealing from the company I don't know what to do.

    I'm sure if I let it be known that I'm onto him the situation will become even more complicated.
  12. LicensedToTrade

    LicensedToTrade UKBF Contributor Free Member

    Posts: 6,330 Likes: 2,140
    So let's hope that he doesn't frequent the UK's largest business forum eh? :D

    If you have evidence that he has been siphoning off funds then that is theft plain and simple. If your own affairs are in order and can survive scrutiny then call the police and report him for fraud.
    • Thanks Thanks x 1
  13. crphillips

    crphillips UKBF Regular Free Member

    Posts: 717 Likes: 166
    Yeah i'd keep it close to your chest for now.

    Do you have access to his emails now or did you just catch a glimpse?

    Yeah it's tricky. I don't really have any further advice for you. Hopefully someone else will chip in with some ideas from a legal point of view.

    To be honest sometimes legal isn't the best way. A good kicking and a warning to leave may work better!

    Good luck.
    Last edited: Jun 12, 2011
  14. NickD

    NickD UKBF Newcomer Free Member

    Posts: 47 Likes: 6
    I think that crphilips is right here. A couple of thousand or thereabouts, is, in the scheme of things, not an awful lot of money. In my case however, it was £96k and I got nowhere trying to recover that!

    Quite apart from the financial loss though, the issue here is dishonesty. You cannot deal with someone who is fundamentally dishonest, they never change. Ever heard the old adage "A leopard never changes its spots?"

    Perhaps you need to sit down with him and confront him about it and express your concerns. As far as the website is concerned, the fact that you put it together outside of the company may mean that you retain all rights to it(?) It depends how you worded the contract between yourself and the other individual.
  15. allan3408

    allan3408 UKBF Newcomer Free Member

    Posts: 10 Likes: 0
    Have you tried contacting a no win, no fee litigation lawyer, there seems to be a few that have popped up with a quick google search recently.
  16. The Resolver

    The Resolver UKBF Regular Full Member

    Posts: 2,101 Likes: 721
    Going straight to litigation is not the way. The values simply do not seem to justify the costs that will be incurred. I can readily see a line of potential defence that will up the ante even further.

    Your main objective (ie as you tell us) is to persuade him that it is in his best interests to sell the shares to you (although, to a lesser degree, I imagine, to account in some way for the commissions). This is difficult give the 50/50 balance, but not impossible as there are certain tactics that can be employed which are best not discussed on this open Forum but which will help him prefer such an outcome to the alternatives. (I have now extended the content at www.BoardroomResolve.com that explains a little more).

    Bear in mind that under the Companies Act 2006 a director must not act in a way that is contrary to the interests of the company.