Director Disputes

[JennyJ]

I am a Director of a company and have 20% share in the same. My co-Director is also the key investor and has a 40% in the business. Put simply, he has not invested any further monies in the comany for the last 6months despite promises to resolve creditor matters. More so, he has in fact been 'missing' for long periods of time, that is to say he has not returned calls, responding to emails / text etc. and has not dealt with creditor matters.

I had to force a board meeting in February following a period of 6weeks without contact (despite me trying). Promises were made at the meeting to resolve some debt issues and raise much needed investment. The next time I spoke with him was at another forced meeting on May 4th - he was uncontactable from Feb 18th thru May 3rd. He raised personal matters as a reason which I have good reason to disbelieve.

During our meeting on the 4th he once again made promises to resolve debt issues and again, I have not heard from him since despite trying to reach him. The meetings were attended by an independent investor (our only one) who is also a shareholder and have been followed with appropriate / emails minutes.

I have also made it quite clear at these meetings and in correspondence that if he can longer support the business then we should close it. Highlight that we have duties to creditors and the fact that I cannot afford to not take a salary.

The problem now is this. I have not taken any monies from the business and my personal finance position is beyond difficult. This to one side, the business is suffering and would be considered as trading whilst insolvent.

I have read about the duties of a director and believe I have acted properly but it is the action of my fellow director that have pushed the company into this financial position. These action, I understand could make us both personally liable to pay those monies due to our clients.

I want to close the company but I am not sure if I would need his input to do this given his shareholding and position. Furthermore, I do not believe I should be personally liable for the debts outstanding - more so believe I have tried to resolve matters, have suffered financially and again have been forced to this position.

What shoud I do? Any advice would be appreciated.

Thank you, Jenny

 

[Chrismckay]

Jenny

There are several ways in which to bring the Company to an end, but most need a resolution of the Board and/or the shareholders.

To place a company into liquidation you need 75% of the shareholders to vote in favour, but that is only those that bother to attend or send a proxy so that may be a way forward.

You could consider resigning as a director to protect your personal position if the Company is trading beyond the point that it cannot avoid insolvent liquidation which could give rise to personal liabilities.

Please contact me directly if you want to discuss matters in confidence. There is no charge for an initial chat to see if we can help you.

 

[KateCB]

Jenny,

I feel for you , however I think in your shoes I would resign as a Director ASAP; you are working for nothing, stressing for nothing and carrying the weight of the major shareholder for nothing......I would give the company nothing......

Just my opinion, but I would talk to Chris to get a more thorough legal understanding of what the resignation would to for you, to you and to the company, shareholders remaining etc.

 

[JennyJ]

Chris, Kate, Thank you both for your reponses.

Chris, I would like to contact you directly - can we email/speak on Monday?

Thanks again.

Jenny​

 

[A City Law Firm LLP]

It sounds as though he is clearly breaching his Fiduicary Duties which can attract personal liabilities for him. Did you issue director's service level agreements or sign up to a shareholders agreement?

These documents govern what each individual can and can't do; responsabilities and duties etc

If he is breaching these terms if you can get the majority shareholders (if he's 40% will the remaining 40% agree with you?) call a meeting to terminate him as a director of the board you could take control back of the company. He may also be voted out as a shareholder if you can establish he's breached the shareholder's agreement.

If the company is in debt his shares maybe worth nothing so you can buy him out for nil consideration or do a deal whereby he pays towards the debt and leaves

Thats if you want to control the company

If you want simply to walk away and protect yourself this will need careful consideration as to what you are liable for at present - whether there are any guarantees in place and creditors can come after you personally - otherwise if not you can resign as a director and offer up your shares and be liable only to lose your share capital POTENTIALLY (a lot to consider first)

If need a company/commercial lawyer to handle the winding up; negotiate your exit or terminate his position we are always free for a compimentary consultation too

Good Luck
karen