Advice on Director's Behaviour, 50% shareholders 2 Directors

[richl1980]

Hello,

Hopefully I am posting in the right place and I have been meaning to seek further advice for a few months given my lack of business nous.

A summary: I am a 50% shareholder and director alongside my business partner who has an equal interest in a LTD company set up 4 years ago. It is an online business where we both work remotely, on opposite sides of the country. Commmunication is mostly via online means.

We toiled for 18 months and finally started generating revenue and paying ourselves a wage.

Since then, I've noticed the work input/output from my colleague has dropped significantly and I started to openly question how his time was spent, and how he could start showing more accountability in that regard. I'd known he suffers from ADHD quite badly so focus is an issue. Our product mostly relies on me as a programmer, enough for my absence to prevent the product being provided. We agreed that I would deal with those matters, and he would deal with marketing and customer support.

Over time, there was a track record of half finished marketing projects, but more importantly, ignored responsibilities on a day to day basis like dealing with customer support issues, replying to emails etc. He has also been dealing with personal issues after splitting up with his wife and children, which I've made a lot of allowances for with his absence and moving forward in his personal life.

Though, longer term, after pressing him hard on how time was spent, he has gradually reduced his visibility online and will also ignore my own emails as well as customers. This has been happening for about 12 months now. I think it would be a fair summary to say that his attentions are not focused on the well being of the company as a whole, and more to his own daily musings.

When the business was created, he created the bank account under his own name, Paypal accounts and whatnot. I briefly had access to the bank account and questioned some expenses such as his Internet connection (and lack of invoices in our accounting software) and purchases in the £300-£500 region which he said were for the company but can easily be argued were more for personal reasons (the assets are business related but could easily be construed as not being). They are domain names. They are actually within an account that is under his personal name rather than the business.

Since mentioning my access to the bank account, I was then locked out of it deliberately by my business partner. I'd already sent forms down to him including all my necessary details which 'apparently didn't reach the bank'.

I suspect my business partner is slightly depressed by his life situation, but he's also making life difficult for me without justification and doesn't appear to be furthering the cause of the business. I'm semi-aware that there's not much I can do within the business, but I have suggested paying him off for 6 months if he resigns as a director. That seems to be a non-option.

In my position, what would you recommend being the best foot forward? It's already been suggested to me that I simply resign and walk away, this basically means losing my monthly wage and the company would likely cease trading.

Thanks for any advice offered

 

[Scalloway]

You could resign as a director and carry on as an employee if you think the business still has prospects.

 

[Chris Ashdown]

From what you say and the fact you have no control over the bank account , I would myself walk the walk and start again using all the experience you have gained

 

[richl1980]

The main reason I ask is because I'm was due to be paid this week but it has not arrived. It is mere brinkmanship by my colleague.

Carrying on as an employee would seem pointless without pay. There is only email agreement about wage / responsibilities.

 

[Mr D]

The main reason I ask is because I'm was due to be paid this week but it has not arrived. It is mere brinkmanship by my colleague.

Carrying on as an employee would seem pointless without pay. There is only email agreement about wage / responsibilities.

What do you want to do?

 

[Scalloway]

Then walk away and put in a legal claim for unpaid wages. I can't see the business going anywhere.

 

[CW Legal Services]

Shareholder's Agtreement? in place

 

[The Byre]

You offer him a very small sum for his share and if he refuses, pull the plug and start afresh.

Right now, what you have there is a dead parrot.

 

[Mr D]

It is an ex parrot, it has ceased to be.

 

[richl1980]

There is a shareholder agreement.

Not quite a dead parrot, the company does turnover ~140K and without the spare part half is profit

 

[Mr D]

There is a shareholder agreement.

Not quite a dead parrot, the company does turnover ~140K and without the spare part half is profit

And you don't control the bank account. So besides having half the shares and responsibilities as a director what do you have?
£140k turnover pays your bills?

 

[richl1980]

Yes, it pays my bills.

So controlling the bank account... are you saying I have little control over matters because I can't see bank statements and send money? I have access to the company debit card, I can buy things. I just can't use the bank account.

Does the remedy for bank access rely on the goodwill of my co-director, or am/should I inherently I access?

 

[Lisa Thomas]

Why don't you have an open conversation with your fellow Director.

Explain your frustrations and that you are considering resigning as a Director - (but continuing to be a shareholder) if you things don't change.

 

[richl1980]

Oh I've definitely tried that. We can have a rational conversation and agree for him to do X and Y, 48 hours later he'll be doing something different. When addressing the situation of X and Y you get a mix of vague statements and a lot of defensiveness. Press him more and you get a change of topic and lots of irrational.

But thanks all for the advice, seems I've learned the hard way and to have everything written down in stone for later insurance.

 

[Lisa Thomas]

In which case I would seriously consider resigning.

 

[Chris Ashdown]

Have you claimed copywrite on what you have done or did you give it to the company, probably academic but might be a bargaining point

Look up your powers as a 50% shareholder on google

 

[nelioneil]

Demand access to the bank account and all company records. As a director, your co-partner cannot refuse you. It is the law!

https://www.legislation.gov.uk/ukpga/2006/46/section/388

 

[The Byre]

The thing is here - we can all chirp away with our 30 cents worth of wisdom, but the reality is, that the OP has to get over to his partner in crime and find out what is really going on. Drugs, alcohol, depression, despair? What?

For all we know, his partner is wallowing in Pilgrim's 'Slough of Despond' and in reality is desperate for any and every bit of help he can get.

He also has to get some proper advice from a professional that is well-versed in company law and here, of course, @The Resolver springs to mind (again!) I suggest that the OP gets in touch with him and gets a reasonable perspective on the situation.

One can only really give any helpful advice, after finding out what exactly is going on - and even the OP has no idea what the score really is!

 

[Newchodge]

Yes, it pays my bills.

So controlling the bank account... are you saying I have little control over matters because I can't see bank statements and send money? I have access to the company debit card, I can buy things. I just can't use the bank account.

Does the remedy for bank access rely on the goodwill of my co-director, or am/should I inherently I access?

If you can't see the bank statements how do you know what the company money is being speny on? As a director you have a duty to ensure that company funds are being spent properly. Of course you should have automatic access to the bank account

 

[The Resolver]

A very common problem. Ownership and Board control is split down the middle but a combination of personal conflict and control of the monies (and sales and marketing channels?) by one severely prejudices both the company's fortunes and those of the interests of both of the shareholders.

I specialise in either mediating these 50/50 splits to help you both see a solution in both your interests (for which I need instructions from both of you ) or advise and represent just yourself in negotiations with the other person. I can give you practical advice of steps to take but if I did that now I would then compromise my neutrality and my ability to take on instruction as mediator should you wish me to. If you would like to know more as to how I can assist (I do this work for clients literally every day) I can give you a free 20mn call to give a basic 'heads up' on your rights , much as I would in mediation and explain how shareholder mediation would work (don't confuse with any other service that uses the word 'mediation') . To avoid confusion within mediation I would inform you of your rights and practical steps available to you but as part of mediation, whilst doing the same with your co-shareholder. It is when you both are fully informed fo the problems for both of you if continue as at present that a resolution becomes more possible.

What I can say just now without compromising my position if instructed later by both of you is DO NOT RESIGN as a director. Maybe later but not now until you are fully informed of the impact. Once you do that you lose much of your power. It would help if before any call (07885 728801) you checked who is the Registrant of the domain name (if unsure go to www.whois.com) and who has the login to the web/mail server account .It would also be best you emailed me the Shareholders Agreement - [email protected]

To all- I know I am being a little less forthcoming in this post here than usual but its just that in this particular case I feel it is very suitable for a speedy resolution through shareholder mediation and want to allow that opportunity before I go into detail of what he can do. I am also taking into account that the 'brinkmanship' over his wages,

 

[richl1980]

DO NOT RESIGN as a director

Thank you for the response, as it happens there's been quite a surreal development where my co-director handed in my own resignation and notified companies house 5 months later...

He had asked for 6 months to prove himself last year and after my patience running thin 4 months later with no sign of any progression (and subsequent argument), he called for a company meeting with the only agenda being my resignation (to be held Mid-December 2017)

We managed to resolve it via a phone call though just this past week he has reactively said that the meeting went ahead without me and my resignation was confirmed. This is after him calling me out the blue after literally no communication in 2018 and asking 'what I want' and then proceeding his conversation on the premise I have resigned.

Interestingly, if I look at what's been written down and what's been spoken about on phone calls, there's a very deliberate line between what has been said via phone call and what's been recorded in text. He would hang up when the conversation turned towards bank account access or simple not reply to written communication. (an ongoing 2 year question alongside asking about his daily work flow which he was also not willing to divulge). Personally I take the view there's a pathological behaviour going on but that it's probably besides the point when it comes to the business. I have no record of the meeting occurring other than events from the past week reactively saying that it had happened (and recollection of our phone conversation saying it was no longer required)

Since the purported resignation, there has been 'normal' communication via text and calls as well as the acrimonious conversations. I have continued 'as normal' with supplying customers with 'the product' and continued to ask why I cannot get access to our bank account. I'd also phoned up the bank who explicitly said I cannot get any information regarding my account without the other director's permission, and they had also refused my own application to access it. I have continually pointed out his express ignoring of customers and never had a rational reason as to why he cannot do the 'boring day to day stuff'.

Wage which was due today has not arrived, and although there is a provision in the shareholder agreement to terminate employment without notice or reason, obviously it's all based on a false premise.

I have handed over all IP, processes etc to colleague, who has also indicated there is an interested party who wishes to purchase my 50% share. This may be a complete fabrication but did seem to be part of the motive of this whole development. I'm led to believe that as a sole director he could dilute my share after a 30 day period.

At the moment I suspect the best course of action is to contact companies house and dispute the filing of the document.

 

[richl1980]

Separately a PSC07 has been filed for 'cessation as a person with significant control'

There is nothing in the shareholder agreement to suggest that any party can remove my shareholding from me.

 

[obscure]

This is after him calling me out the blue after literally no communication in 2018 and asking 'what I want' and then proceeding his conversation on the premise I have resigned.

So he phoned you, asked what you want (makes it sound like you called him) and then proceeded to talk as if you resigned?

I would be he was recording the conversation with the intention to use it as proof that you resigned.

 

[Bob Morgan]

"In my position, what would you recommend being the best foot forward?" - Sit down together, and talk about it 'Face-to-Face!'

 

[richl1980]

"In my position, what would you recommend being the best foot forward?" - Sit down together, and talk about it 'Face-to-Face!'

Ha, indeed. Unfortunately I've tried the moral/rational/friendly and any other generally humane route, and generally he's a bit of a coward.

I'm going to report this whole charade as an act of fraud as that is what I believe it is, and let the legal framework deal with it. From my POV I've been forthright and acted in the best interests of customers and shareholders, so I'm happy to prove as much to other parties.

 

[Stedurham]

I would drive down and have a face to face