Company Director Access

[johnt5293]

Around 18 months myself and 2 colleagues were approached by the owners of the company we work for and asked if we wished to buy the company from the current owners.

The deal was to be financed through deferred consideration, with the previous owners staying on as directors until the money was paid.

It was agreed that they would be paid a fixed sum, and then take a management fee, paid weekly.

The deal was all done through solicitors, we have signed said agreement. A new holding company set up, which now owns the shares of the company being purchased. We have been made directors of the company we are purchasing. All registered at companies house, stamp duty paid etc…

The problems are as follows:

1) One of the previous owners is still currently the only person with access to the company bank account. They have refused to grant us access
2) we have no official access to the company’s Sage accounting software
3) We know the previous owners are paying for things through the company, and with company money that are not for company use (tools etc), as well as continuing to pay for their personal health insurance
4) The previous owners also pay a labourer to carry out work at their property/other business. We were told this, and that had been advised to carry on with this arrangement, but that they would pay the money back/knock it off the deferred consideration. So far this has not happened
5) one of the previous owners has taken some scrap metal off site and sold it, and the money has not gone to the company…

Any insight/advice on what we should do regarding any or all of the above points would be appreciated l.

 

[Newchodge]

Around 18 months myself and 2 colleagues were approached by the owners of the company we work for and asked if we wished to buy the company from the current owners.

The deal was to be financed through deferred consideration, with the previous owners staying on as directors until the money was paid.

It was agreed that they would be paid a fixed sum, and then take a management fee, paid weekly.

The deal was all done through solicitors, we have signed said agreement. A new holding company set up, which now owns the shares of the company being purchased. We have been made directors of the company we are purchasing. All registered at companies house, stamp duty paid etc…

The problems are as follows:

1) One of the previous owners is still currently the only person with access to the company bank account. They have refused to grant us access
2) we have no official access to the company’s Sage accounting software
3) We know the previous owners are paying for things through the company, and with company money that are not for company use (tools etc), as well as continuing to pay for their personal health insurance
4) The previous owners also pay a labourer to carry out work at their property/other business. We were told this, and that had been advised to carry on with this arrangement, but that they would pay the money back/knock it off the deferred consideration. So far this has not happened
5) one of the previous owners has taken some scrap metal off site and sold it, and the money has not gone to the company…

Any insight/advice on what we should do regarding any or all of the above points would be appreciated l.

Talk to the solicitor who advised you. Unless they also advised the other side.

 

[Ziggy2024]

Speak to the bank for access to the account.

Speak to your accountant for access to accounts, they will no doubt have a backup of the last years figures and may have live access.

As noted take legal advice. I would make sure you put everything in writing to the other directors and emphasise that they are preventing you from performing your fiduciary duties plus may be breaching their contract.

 

[Elliot Green]

Are you all directors of the subsidiary?

 

[fisicx]

It feels like this was their plan all along: To make you responsible for the company and then steal all the money.

As advised, talk to your solicitors and the bank. Make them both aware fraud is happening.

 

[Bobbo]

1. You need to sit them down with the change of bank mandate form to get the three of you added to it asap.
2. Your reference to 'official' access implies you have some form of unofficial access. Again you need to sit them down and get them to give you invitations to access or whatever.
3. Former owners paying for things through the company could be okay if being correctly posted to DLA (which I guess you don't know for sure given point 2). Health insurance is one to clarify - is the company paying their personal health insurance, or is it a company policy covering those persons? Either way any benefits like this should've been clarified as part of the sale agreement.
4. When you say "the previous owners pay a labourer" presumably you mean "the previous owners direct the company to pay a labourer" - I guess keep a record of how much is involved so it can be repaid / taken off consideration owed.
5. Sounds like straight up misconduct by that person. Potentially gross misconduct if they are effectively stealing company assets for themselves.

Reality is you need control of the company asap and these persons out. I would be getting advice on whether these persons can be sacked and lose all future 'management fee'

 

[WaveJumper]

Back to your solicitor ASAP I have a very strong feeling you are going to get severely fleeced and left with an empty shell.

 

[Newchodge]

Back to your solicitor ASAP I have a very strong feeling you are going to get severely fleeced and left with an empty shell.

I agree. The issue, I suggest is setting up the holding company which owns the original company and of which the OP and friends are not directors.

 

[Paul Kelly ICHYB]

We have been made directors of the company we are purchasing.

But not the holding company?

A new holding company set up, which now owns the shares of the company being purchased

Are you purchasing the old company or holding company?

Where did you find the solicitor? If they have anything to do with the owners, change them.

 

[johnt5293]

But not the holding company?


Are you purchasing the old company or holding company?

Where did you find the solicitor? If they have anything to do with the owners, change them.

We have set up our own holding company, which we own all of the shares in.

The previous owners have their own holding company.

We are directors of the new holding company. We were told that the previous owners also had to be directors of this company (but they are not shareholders).

We have been made directors of the original company we are buying. The previous owners are still directors of the original company…

 

[DontAsk]

The previous owners have their own holding company.

Where does that fit into the puzzle? What does it own?

We are directors of the new holding company. We were told that the previous owners also had to be directors of this company

By who? Why?

We have been made directors of the original company we are buying. The previous owners are still directors of the original company…

So who owns the shares of the original company?

Is there a shareholders agreement?

Do you own enough shares to have complete control?

 

[Paul Kelly ICHYB]

Why do you and they have a 'holding' company?

Which company owns the shares of the main business.

Unless there is something you are not letting us know, it sounds like you legal advice was terrible and you are being taken for

 

[fisicx]

We have set up our own holding company, which we own all of the shares in.

The previous owners have their own holding company.

We are directors of the new holding company. We were told that the previous owners also had to be directors of this company (but they are not shareholders).

We have been made directors of the original company we are buying. The previous owners are still directors of the original company…

You have been given some very bad advice. Did you have your own independent solicitors? If so they were wrong.

Either way it looks like you have been well and truly shafted.

 

[Daybooks]

Re-inforcing much of what @Bobbo has said, as directors of the company you purchased your first approach I would suggest is to call a directors meeting to resolve the issues. You have not mentioned the composition of shareholding or directors which may influence the way you need to go about things. Read the relevant sections regarding director meeting, directors removal etc in the Companies Act and make sure you follow the rules.

You also need to clarify ( for yourselves if not us ) who the shareholders are of the relevant companies. This will establish who controls what and thus your options.

Unless you have a shareholders’ agreement there is no requirement for the appointment of directors other than prescribed by the Articles and company law.

On a practical level a worse case scenario is that if you have sufficient control is to remove the directors, use that to effect a change to the bank mandate - or open a new account and get control of daily operations including where customers receipts are paid into.

If there are external accountants and or bookkeepers then discuss with them; you might learn a thing or two about previous operations.

 

[WaveJumper]

Sounds like a holding company holding nothing.

All good advice above but it sounds like you are having a baptism by fire here if your current solicitor can't give you sound advice I suggest you need to seek the services of another before this all blows up.

Can't remember if I read this above but you did seek your own legal council and have not relied on the current owners?

 

[Mark T Jones]

Definitely get solid, independent legal advice

In the meantime, @The Resolver may be able to guide you

 

[The Resolver]

You refer to two holding companies. One you and you colleagues own (presumably to be the company to which the shares in the company running the target business will be transferred on payment). The other being the company that now owns all the shares in the company running the business. Correct me if I have misunderstood.

Send me in confidence a copy of the share sale agreement ([email protected]) plus your phone number and I will advise you (at no charge) in a 30mn call

It is, by the way, an offence under company law for a Director not to share the financial records (not just the annual accounts but the ongoing bookkeeping) with all other Directors. Its a serious matter as it prevents the other Directors from properly carrying out their duties in law.

 

[Daybooks]

It is, by the way, an offence under company law for a Director not to share the financial records (not just the annual accounts but the ongoing bookkeeping) with all other Directors. Its a serious matter as it prevents the other Directors from properly carrying out their duties in law.

Companies Act 2006 S388(1)(b)

Companies Act 2006

An Act to reform company law and restate the greater part of the enactments relating to companies; to make other provision relating to companies and other forms of business organisation; to make provision about directors' disqualification, business names, auditors and actuaries; to amend Part 9...

www.legislation.gov.uk

 

[The Resolver]

If trying to persuade co-directors to share the financial records, its helpful to explain that you can raise a complaint with the Insolvency Service requesting them to consider exercising their powers to disqualify them from being Directors. This threat may be a useful alternative to funding litigation so as to kick start negotiations for the resolution of the conflict.

 

[Newchodge]

If trying to persuade co-directors to share the financial records, its helpful to explain that you can raise a complaint with the Insolvency Service requesting them to consider exercising their powers to disqualify them from being Directors. This threat may be a useful alternative to funding litigation so as to kick start negotiations for the resolution of the conflict.

It may be helpful, first, to establish that they need the records of the company they are directors of. They won't be entitiled to the records of the other holding company

 

[The Resolver]

Hi Cyndy, I understood the OP to say he and his colleague are Directors of the company they are purchasing as are the original Directors. I took this to mean the company running the business and with whom he was an employee. As such all Directors have a duty in law to allow access to the financial records of all other Directors. I agree, however, .we could do with some clarity as to the Boards of the company and the two holding companies.

I'm not sure you meant it in this way but , to be clear, establishing need with those seeking the records is not a pre-requisite for the duty to share the records

.

 

[johnt5293]

You refer to two holding companies. One you and you colleagues own (presumably to be the company to which the shares in the company running the target business will be transferred on payment). The other being the company that now owns all the shares in the company running the business. Correct me if I have misunderstood.

Send me in confidence a copy of the share sale agreement ([email protected]) plus your phone number and I will advise you (at no charge) in a 30mn call

It is, by the way, an offence under company law for a Director not to share the financial records (not just the annual accounts but the ongoing bookkeeping) with all other Directors. Its a serious matter as it prevents the other Directors from properly carrying out their duties in law.

Thanks for this reply, and to all whom took time to read and comment.

I have sent The Resolver an email as suggested…

Thanks again.