60/40 shares - directors problem

[Torent5]

we have 2 directors in our company
i am having 60% shares.
unfortunately we argued and i am thinking about splitting company
as it`s quite a big company to save myself and company i was wondering what rights do i have
can i block bank account so he won`t be able to use it?
can i block his card?
can i tell him that he is not authorised to deal with company issues?

as he is also taking monthly salary, as i director with more shares am i able to fired him so he will only be entitled for dividends?

any other thinks i could do that may be helpfull?

 

[teddys]

You as a majority shareholder could remove him (subject to some paperwork and timescale) as the director. Problem solved. However, his entitlement to dividend etc as a shareholder will continue. Since it's a big company, as you say, shouldn't you be taking paid for external advice?

 

[Energise Accounting]

Take legal advice on this matter. As he is also a director their could be grounds for unfair dismissal.

 

[Torent5]

he started another business in the time and now he has no time at all so if he takes salary for nothing, is this fair?
so if i ask him to work every day (it won`t happen) would it be a reason to dismiss?
he put his every second to the second business making him useless for this one, just one extra cost...

 

[Paul Norman]

I simply repeat the comment above. You are a big company, and therefore the stakes here are big. You need, both of you, to engage legal representation and sort things out.

What is, and is not fair, is not relevant. What is relevant, is what the legal agreement between the legal entity of the company and each individual as employed directors, requires to happen.

If you sack him, he is still a significant shareholder, with a legal right to some say in who the directors of the company are. See how a loop could happen here? It is vital, and quickly, to negotiate a solution, and to ensure it is legal.

 

[Bob]

Did you have a shareholders agreement? Might be worth speaking to @The Resolver

 

[Chris Ashdown]

Have you considered buying him out, ask what he would want to sell his shares to you and leave the company which in many cases is the most sensible route and financially better in the long run

Alternatively you could block awarding dividends in the future, you can change permissions with the bank to make only yourself in-charge of the bank account but could have problems doing so if he is a bank guarantor for any loans etc

Really you do need expert advice

 

[Energise Accounting]

I don't think you should do anything silly at this stage like blocking bank permissions etc. I would try and appeal to his better nature and as him to resign as a director if he wishes to concentrate on other business ventures as it is not fair to draw a salary if he is not actually doing any work.

If this dose not work., take legal advice before doing anything. After all we are Accountants and not Solicitors or Barristers

 

[The Resolver]

As the majority shareholder you have control. You can cease his salary by terminating his employment, remove him from the Board and cease dividends for the time being.

However you have to go about matters in the correct way. As to ceasing his employment he may have employment rights not to be unfairly dismissed so you have to follow proper disciplinary procedures (albeit if he is not doing the work this should not pose a problem).

Removing him from the Board requires a minimum 28 days written notice of a shareholders meeting. (You have to know how to vote at shareholders meeting since, unless you formally call for a Poll, your votes will be calculated on a show of hands which would then mean 1:1 and the Resolution not being passed!) If you just want to be able to control Board decisions a quicker and easier way may be to appoint a third director who you can trust eg spouse. Removing him from the Board will likely enable you to remove him from the bank mandate but that all depends on the banking arrangements.

As to dividends, if you cease to declare them that will prevent you also claiming them unless you have issued two classes of shares so could stop his shares receiving a dividend but not yours.

All of this does not enable the shares to be transferred (assuming there is no Shareholders Agreement or bespoke Articles of Association providing for such) so you need to negotiate to buy them. Knowing your powers as above ,and , importantly, your co-director knowing you know them, will help negotiations to become positive. It may be you can set out a case for his breach of his duties as a director (does his other business damage in any way your business other than his lack of work pp your company?) in which case you can threaten, in the absence of an agreed solution, to sue him in the name of the company for damage he has caused. You may also have a breach of contract claim if when you set up the company and issued him his shares it was clearly in return for his working for the company to help it succeed. Of course I do not advise actually litigating as that will drain a lot of monies from the company/your pocket and only bring in significant delay before you reach an outcome. Also, issuing solicitors letters at this stage make it harder to generate the right atmosphere in which to negotiate. But its important that he knows your options in that regard and he believes you might go down that path if negotiations fail. The other element you have to focus on is the benefits available to him if he does agree an exit, (eg tax savings when deals are structured in certain ways) rather than remain in battle mode.

I help clients develop a negotiation strategy in these situations to settle out of court. I need of course much more information. Give me a call and we can discuss. There is no charge or commitment for that first call.

 

[Torent5]

please help, i have used my own account for sales for our business, now when we think to split up do i just take the account back?
there was no agreement about the account.
how to save the account?

 

[Torent5]

should i just drop to old documents my statement saying that i let the company use it without any payments for using untill i think it`s nesessary?

 

[Scalloway]

Using a personal account for a limited company means that you have had a loan from the company which is subject to a tax charge.

 

[Torent5]

Using a personal account for a limited company means that you have had a loan from the company which is subject to a tax charge.

it was my personal account but then i have changed to business for company use
would it be still my account if company will be resolved?
it has all company details in contact details and we pay all taxes for sales trough there.
why would i have to pay any taxes if i had no profit?

 

[Scalloway]

Did your bank sign up the company? If it did not the bank account is legally your property and as far as the company accounts are concerned you owe the company that money as an individual.

There is information on tax and sums owed to a company by a director here

https://www.gov.uk/directors-loans/you-owe-your-company-money

 

[Energise Accounting]

Unfortunately, their is no quick fix to this have you followed @The Resolvers advice? a way of dealing with this may be to sell or gift some of your own shares to your wife that way at a shareholders meeting you can appoint your wife as a director please take legal advice on this before you act

 

[Torent5]

Unfortunately, their is no quick fix to this have you followed @The Resolvers advice? a way of dealing with this may be to sell or gift some of your own shares to your wife that way at a shareholders meeting you can appoint your wife as a director please take legal advice on this before you act

i would do that but it says transfer must be agreed by shareholders which will not be agreed by the other director
any advice?

 

[Scalloway]

Follow the Resolver's advice. I don't think you are going to get anything better here.