Director but not a Director

[jordao]

Hi, I have been at my current place of work for 5 & half years during which time (about 4 years ago) we became a limited company, they needed someone to become managing director, it turned out to be me, I have never been anything other than an employee really, I have never had any say in the finances or running of the company whatsoever, I am not informed of anything that is going on either.

The company is currently going through difficulties & our financing bank has become involved heavily into it, they have realised that the people who actually run the company & named them as shadow directors, thus making them as liable for losses & resposibilities as a director.

I was wondering, is there something out there that protects people in the position as myself, I have signed a indemnity & by the way the bank made the other 2 people (shadow directors) sign it too.

I really haven't had any input into the company so there must be a law somewhere that covers this instance.

Any advice would be great

Thank you

 

[Zeno]

Were you just given the title managing director or were you formally oppointed at companies house?

You have got youself into a serious situation. Wht did you allow youself to be held out as MD? The word scapegoat comes to mind.

Get legal advice ASAP.

 

[jordao]

it is at companies house, hopefully the saving grace hopefully is that the finance bank know who pulls the strings have named these people as shadow directors due to their total influence over the company.

So isn't there something that protects a director the other way when it is obvious that the person has no say whatsoever

Thanks for replying by the way

 

[anfy1002]

With due respect. Why on earth did you let them appoint you as MD. My understanding and i am sure that will be the legal oponion is that ignorance is no excuse. You should have read the duties and responsibility of directorship at companies house website. I think you could be in for big trouble ahead. Please get good legal advice quickly. I am pretty sure of this as i have a friend in exactly the same situation.

 

[Zeno]

I am afraid I have not heard of such a provision. You have signed to say that you agree to act as a director and receive the responsibilities of such. - the obvious question is why you allowed yourself to be used like this and why you did not resign when you were aware what was going on?

 

[jordao]

I didn't resign as I didn't know what was going on, nobody except the 2 other people know whats going on in the company, I know very stupid of me, I've always just been an employee here, never treated any other way, I just come in and get on with my job and they do their bit together

 

[Zeno]

But you knew that you were the figurehead of the company with no power? You surely knew that there could not be a legitimate reason for this?

I am sorry to sound harsh but these questions will be asked by people far harsher than me.

What did the company accountants say? You must have signed the financial statements?

 

[anfy1002]

Here is something for you to think about! I already own 1 quite large company i am about to buy another. If i buy the major shareholders shares and buy the company as a going concern. I will be legally responsible for all previous debts that even means before i became MD. So was the company trading as ltd company before you were appointed as md? because if so your problem maybe worse than you thought! You need to get legal advice and get it soon. Quite simply every day this ltd company trades whilst you are MD the bigger your problem can get. You may still be in financial trouble but put the brakes on now.

 

[jordao]

I appreciate your straight talk, the reason why it happened in the first place is that there are 2 companies in this building & they are directors of the other one, they couldn't be directors of both, these companies work closely together & have the same accountants so it just carried on, all that happens is I sign the end of year accounts once a year

You can probably tell from my replies that I am no businessman

 

[jordao]

anfy1002

It wasn't trading as a LTD company before I was made MD, I was here about 1 and half years before it went limited

 

[anfy1002]

2 Companies and they are directors of the other one. This smells more fishy the more you say. Does by any chance one company invoice the other one for any money?. With due respect you do need LEGAL ADVICE

Regards

Tony

 

[jordao]

anfy1002 & Zeno

I really appreciate your advice, its very helpful

I will get legal advice, when you say heading for big trouble, can you enlighten me of the big trouble

One company rents its space off the other one & yes there is trading between the 2 companies

Thanks again

 

[anfy1002]

How did i know? I guess the other company is not in trouble? Can you see where this is heading?

Regards

Tony

 

[jordao]

I don't know how this will go down, the other company is in serious trouble, I do believe it will fold, it may already be going through with the administration process, I know where you were going with it though

This company is saveable, it has a full order book, however it comes down to the Finance bank & funding, yes I will resign as director if we get out of it

 

[Zeno]

Ok, most likely the reason for your appointment is that they are trying to get round the associated company rules for tax. This suggests the motive for a tax advantage rather than having you hold the can if it went tits up (Formal accountancy expression).

This however does not help you much as you still have the problem of your responsibilities. I am afraid a lot of this will come down to the fact that you did agree to be made a director and assume the responsibilities as such. As has already been pointed out, ignorance is no defence.

What you need to do is start getting together everything you can think of that provides evidence that you had no control - Are you a signatory on the company cheque book?, Who signs letters?, What do the other staff know?

 

[jordao]

I am one of the signatories on the cheque book & I do sign letters e.g. to suppliers etc.

Staff don't know anything as yet only that we are having a problem with our financing, apologies for asking again, what's the big trouble ahead then

Thanks

 

[Zeno]

I am sorry but I don't think I can help any further other than advise you to get legal asssistance quickly as in right now before this gets worse.

 

[anfy1002]

I am one of the signatories on the cheque book & I do sign letters e.g. to suppliers etc.

See quote above!! You say you did not know what was going on. The fact that you signed stuff appears you had more of an input into the directorship of the company than you say. You should be talking to a legal head now. It appears that proof of lack of knowledge of the business and your director responsabilities are ebbing away.

 

[jordao]

Thank you for your help, it has helped me

If there is anyone out there who would like to give any other help it would be most welcome

Cheers

 

[anfy1002]

I agree with Zeno and i wish you good luck!!

 

[jordao]

I will keep you informed of the outcome if you want

I will also buy you 2 a beer too

Thanks

 

[anfy1002]

Just a word about solicitors "watch your budget" They are brilliant and will help, but always be mindful of how much they are going to charge. in fact i find if if i tell mine the budget i can afford He always works within that. But always be honest with them. withou all the facts it makes their job and your costs harder and more expensive.

Good Luck

tony

 

[jordao]

Tony

Thanks for your advice, even though you have made it clear to me of the situation I'm in at least I know what to do as such

I will say that the Finance bank don't even speak to me when they ring, so they know the score here & its them that will stop the company operating, they know who is pulling the strings, I know I am a situation though

If anything comes to mind at all, please feel free to get in touch, I will be constantly checking this Thread

Thanks again

 

[mahutchinson]

I would resign immediately. You have no idea of your legal repsonsibilities nor what the company is doing and you are liable for passing resolutions and signing off the accounts, paying tax etc etc. It's not clear at all why the directors of the other company can't be directors of this one - sounds like a dodgy conflict of interest somewhere. The accountants also must be aware that the director is not providing the information they receive. Forgot to mention - if the shadow directors break the law, you may get prosecuted !