- Original Poster
- #1
I've got an interesting one here!
Ltd Company, 50/50 2 directors and shareholders, amended articles of association, no shareholders agreement.
Pertinent clauses from the articles included below.
Situation:
2 directors, both with serious grievances against the other. Director 1 lets it slide for the good of the company, doesn't want conflict, wants the business to succeed. Director 2 has ulterior motive to force Director 1 out and replace with his wife, so convinces D1 to let him be chairman at a meeting regarding misconduct/disciplinary, without D1 realising this means D2 gets a casting vote (otherwise he would not have agreed). Clearly D2 has premeditated this or he would not have orchestrated this position. Yes, D1 should have taken advice earlier but that's by the by.
D2 engages separate HR firm to take D1 through disciplinary, found guilty of gross misconduct, D1 appeals, second HR firm uphold the original decision and D2 votes to remove D1 "as operations director," orders him to hand back his keys, bank card etc and get out, as he is no longer an employee of the business.
Nothing was signed by D1, he is still a director at Companies House, he is still a 50% shareholder. There was no shareholders meeting to vote on the removal of a director.
D2 is refusing D1 access to the company's books, and refusing to have interim accounts drawn up, but demanding D1 sells his share for a pittance.
I've been through the articles in detail. It looks to me like D1 has been bamboozled into giving D2 the casting vote and he has been ejected as working in the business, and, in the words of the legal advice he received "nothing you can do, unfortunately he got to you before you got to him."
However, am I right in thinking that D2 is conflating "Operations Director" as a job title with the officer role at Companies House, which is a separate issue and which cannot be decided by his casting vote as chairman? D1 retains his fiduciary duties as a director including making sure the accounts are kept correctly, no fraud is going on, etc [D2 has done some very questionable things].
The accountant is siding with D2 and refusing access to accounting software.
Obviously, they either need to agree a sum amongst themselves, go to arbitration, or go legal. While any advice for D1 is welcome, that's not why I'm here.
My question is whether I have understood the situation correctly, and if there's anything we can do on a point of practice with regards the "you are no longer an employee of the company" part.
The accountant in me is saying the guy hasn't got this entirely right, but as I'm emotionally involved, and as this has all gotten far more complex (never heard of the external HR thing happening in a small Ltd before), I'm somewhat bamboozled myself and want to bounce it off others please.
Thanks for reading this far!
Pertinent sections from the articles:
Article 13
1. If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote
2. But this does not apply if, in accordance with the articles, the chairman or other director is not an eligible director for the purposes of that meeting (or part of a meeting).
8 Eligible directors are directors who would have been entitled to vote on the matter had it been proposed as a resolution at a director’s meeting.
5
The quorum [minimum number of members] for director’s meeting may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two eligible directors.
2. For the purposes of any meeting held in accordance with article 11 to authorise a director’s conflict, if there is only one eligible director in office other than the conflicted director, the quorum for that meeting is one eligible director.
Ltd Company, 50/50 2 directors and shareholders, amended articles of association, no shareholders agreement.
Pertinent clauses from the articles included below.
Situation:
2 directors, both with serious grievances against the other. Director 1 lets it slide for the good of the company, doesn't want conflict, wants the business to succeed. Director 2 has ulterior motive to force Director 1 out and replace with his wife, so convinces D1 to let him be chairman at a meeting regarding misconduct/disciplinary, without D1 realising this means D2 gets a casting vote (otherwise he would not have agreed). Clearly D2 has premeditated this or he would not have orchestrated this position. Yes, D1 should have taken advice earlier but that's by the by.
D2 engages separate HR firm to take D1 through disciplinary, found guilty of gross misconduct, D1 appeals, second HR firm uphold the original decision and D2 votes to remove D1 "as operations director," orders him to hand back his keys, bank card etc and get out, as he is no longer an employee of the business.
Nothing was signed by D1, he is still a director at Companies House, he is still a 50% shareholder. There was no shareholders meeting to vote on the removal of a director.
D2 is refusing D1 access to the company's books, and refusing to have interim accounts drawn up, but demanding D1 sells his share for a pittance.
I've been through the articles in detail. It looks to me like D1 has been bamboozled into giving D2 the casting vote and he has been ejected as working in the business, and, in the words of the legal advice he received "nothing you can do, unfortunately he got to you before you got to him."
However, am I right in thinking that D2 is conflating "Operations Director" as a job title with the officer role at Companies House, which is a separate issue and which cannot be decided by his casting vote as chairman? D1 retains his fiduciary duties as a director including making sure the accounts are kept correctly, no fraud is going on, etc [D2 has done some very questionable things].
The accountant is siding with D2 and refusing access to accounting software.
Obviously, they either need to agree a sum amongst themselves, go to arbitration, or go legal. While any advice for D1 is welcome, that's not why I'm here.
My question is whether I have understood the situation correctly, and if there's anything we can do on a point of practice with regards the "you are no longer an employee of the company" part.
The accountant in me is saying the guy hasn't got this entirely right, but as I'm emotionally involved, and as this has all gotten far more complex (never heard of the external HR thing happening in a small Ltd before), I'm somewhat bamboozled myself and want to bounce it off others please.
Thanks for reading this far!
Pertinent sections from the articles:
Article 13
1. If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote
2. But this does not apply if, in accordance with the articles, the chairman or other director is not an eligible director for the purposes of that meeting (or part of a meeting).
8 Eligible directors are directors who would have been entitled to vote on the matter had it been proposed as a resolution at a director’s meeting.
5
The quorum [minimum number of members] for director’s meeting may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two eligible directors.
2. For the purposes of any meeting held in accordance with article 11 to authorise a director’s conflict, if there is only one eligible director in office other than the conflicted director, the quorum for that meeting is one eligible director.
