50% director terminated without my consent

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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
Hello All

Overview:

Ltd company
50% 50% 2 directors / 50% shares each
Selling a service
Only company assists 2 x laptops
Both directors work from home
No staff

I had my directorship fraudulently terminated in November with out my consent. We continued a normal day to day dialogue for several weeks until I found out. My co-director then took control / hacked my email, again without my consent, and sent me a text telling me he'd seized control.The matter is being handled by the Police.

2018 - 2019 company accounts are now due.

During that period we drew a payroll along with dividends. Last week x-business partner sent me a spreadsheet showing that the dividends have been converted in to a directors loan and that I have to pay back immediately £8k for corporation tax payment. Obviously I had no say, is he allowed to do this and who ultimately is liable for the £8k?

Thanks for listening
 

Mr D

Free Member
Feb 12, 2017
28,630
3,561
Stirling
Don't expect the police to do anything.
Disagreements between directors - messy and often enough expensive.

Question is, what do you want to happen? It sounds like walking away from this business is an option, though whether a good one is less certain.


The company is liable for the corporation tax. If company cannot pay then company becomes insolvent and is eventually dissolved. You personally have no liability for any business debts unless you have signed a personal guarantee. Usually things like leases, overdraft etc.

Somewhat baffled how the director converts the dividend into a directors loan then immediately tries hitting you up for money you don't owe to pay a bill the company should be able to pay easily from its profits.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
Don't expect the police to do anything.
Disagreements between directors - messy and often enough expensive.

Question is, what do you want to happen? It sounds like walking away from this business is an option, though whether a good one is less certain.


The company is liable for the corporation tax. If company cannot pay then company becomes insolvent and is eventually dissolved. You personally have no liability for any business debts unless you have signed a personal guarantee. Usually things like leases, overdraft etc.

Somewhat baffled how the director converts the dividend into a directors loan then immediately tries hitting you up for money you don't owe to pay a bill the company should be able to pay easily from its profits.

Thanks for your advice

I wanted to get it on record with the Police, I submitted online. I know nothing will happen.

I have 100% walked way from the company, but I still have a 50% share

Agreed regarding directors loan, no personal guarantee was signed, unless he's forged my signature!
 
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Newchodge

Business Member
Nov 8, 2012
16,221
4,583
Newcastle
Was the 2018-19 dividend agreed in a properly minuted board meeting?

A dividend is only payable from available profits. If there were no profits in 2018-19, no dividend should have been paid. If a dividend were paid illegally, and the company goes bust, the liquidator can go after the shareholders to recover illegally paid dividends to distribute to the creditors. If your dividends were not payable then neither were the other shareholdeer's.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
Was the 2018-19 dividend agreed in a properly minuted board meeting?

A dividend is only payable from available profits. If there were no profits in 2018-19, no dividend should have been paid. If a dividend were paid illegally, and the company goes bust, the liquidator can go after the shareholders to recover illegally paid dividends to distribute to the creditors. If your dividends were not payable then neither were the other shareholdeer's.

Hi

No properly minuted board meeting

Dividends were paid from the profit, but paying corporation tax at the time wasn't taken into account
 
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Newchodge

Business Member
Nov 8, 2012
16,221
4,583
Newcastle
Hi

No properly minuted board meeting

Dividends were paid from the profit, but paying corporation tax at the time wasn't taken into account
Do you mean all the pre tax profit was paid out in dividends? If so your ex colleague has a problem. I cannot see any reason for you to repay dividends that were paid, at this stage. Do you have any written evidence that they were dividends?

If he produces proper accounts that demonstrate that the dividend should not have been paid, you may like to consider whether you would repay. A spreadsheet showing it has been converted to a director's loan is something I wouold completely ignore.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
Do you mean all the pre tax profit was paid out in dividends? If so your ex colleague has a problem. I cannot see any reason for you to repay dividends that were paid, at this stage. Do you have any written evidence that they were dividends?

If he produces proper accounts that demonstrate that the dividend should not have been paid, you may like to consider whether you would repay. A spreadsheet showing it has been converted to a director's loan is something I wouold completely ignore.

No written evidence

Proper accounts have been produced which don't mention anything about the dividend not being paid. Re. Spreadsheet - my thoughts exactly
 
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Karimbo

Free Member
Nov 5, 2011
2,090
215
Thanks for your advice

I wanted to get it on record with the Police, I submitted online. I know nothing will happen.

I have 100% walked way from the company, but I still have a 50% share

Agreed regarding directors loan, no personal guarantee was signed, unless he's forged my signature!
There is an entire financial fraud department and the police will investigate it. It is a fraud, if you're 50% shareholder and 50% director you will need to have a say on who gets fired on the board of directors.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
There is an entire financial fraud department and the police will investigate it. It is a fraud, if you're 50% shareholder and 50% director you will need to have a say on who gets fired on the board of directors.

The thing that really irks me is that we continued a daily dialogue including some very long phone calls for about 3 weeks before I found out.
 
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Mr D

Free Member
Feb 12, 2017
28,630
3,561
Stirling
There is an entire financial fraud department and the police will investigate it. It is a fraud, if you're 50% shareholder and 50% director you will need to have a say on who gets fired on the board of directors.

Its a disagreement within a company. Police tend not to investigate - far better use of their time as security guards, traffic directors and stopping people for walking while black.
 
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Mr D

Free Member
Feb 12, 2017
28,630
3,561
Stirling
Thanks for your advice

I wanted to get it on record with the Police, I submitted online. I know nothing will happen.

I have 100% walked way from the company, but I still have a 50% share

Agreed regarding directors loan, no personal guarantee was signed, unless he's forged my signature!

You could - at some point - set up in competition with that business. If you aren't involved it can't be a breach of your duty to the company.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
You could - at some point - set up in competition with that business. If you aren't involved it can't be a breach of your duty to the company.

The legal advice I have been given is that as I was basically sacked for no reason opening up as a direct competitor would have no conflict of interest. Also being a 50% shareholder a lot of mischief can be had!
 
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Karimbo

Free Member
Nov 5, 2011
2,090
215
Mr D

At some point the co-director would have forged a signature or lied about OP not being reachable to get him terminated. Terminating directors requires a majority board decision, they cannot get a majority by themselves.

This is a criminal matter, not some disagreement about whether they own 35% or 40% of a share in the company.
 
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davebristol

Free Member
Dec 9, 2019
16
0
Bristol
Mr D

At some point the co-director would have forged a signature or lied about OP not being reachable to get him terminated. Terminating directors requires a majority board decision, they cannot get a majority by themselves.

This is a criminal matter, not some disagreement about whether they own 35% or 40% of a share in the company.

I concur. The legal advice Ive been given - walk way dont burn my energy, use it to build another business. TBH the business wasn't working altho it was making some money. He's done me a favour
 
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