Rules Governing Director Resignations

[Penpusher]

A friend and Company Secretary (Director X) of a small limited company has been 'resigned' with notice given to Companies House in retrospect. Is this possible?

My friend (X) and her partner (Y) started a service company with one other director (Z) in December 2008. Problems in their personal relationship caused a break up in March 2009 whereupon she left the family home, though she was still working for the company on a contract basis.

Following the split in their relationship her partner was keen to end their business relationship as well, and so there was talk (only) of the possibility of her resignation. This was taken as a de facto resignation by "Y" who in September 2010 told her that he had informed Companies House of her resignation with effect from 30th November 2009 the end of the first financial period.

The directors have no formal share agreement, everything was on trust, "X" and "Y" had been together for 10 years and have two lovely boys, and no meetings were called to agree a dismissal or to formalise her 'resignation'.

It is unknown whether the votes of "Z", the predominantly silent director, were asked for, though "X" believes this to be unlikely given her own business friendship with "Z". It seems most likely that "Y" just filled in Form 288B (Resignation of Directors) and sent it on to Companies House without formal notice of "X" or possibly "Z". Is this legal? Should "Y" have signed something to say that she had agreed to resign for submission to Companies House? What are the ramifications with regard to the assets of the business? Does "X" have any rights with regards to reinstatement (should she desire it) or severence payments? Has "Y" acted fraudulently with regard to informing Companies House?

Thoughts anyone?

 

[The Resolver]

If there has been neither a resolution passed by the Shareholders in general meeting dismissing her, nor has she signed any letter of resignation, then she remains a director no matter what it says at Companies House

It would seem that Y has completed a false statement to CH

X has rights to exercise to protect her interest in the company To begin with X should formally call a board meeting to discuss the matter on record and possibly also, if not then resolved, to then call an extraordinary general meeting of shareholders

Y has made a big mistake and X could cause damage to him This situation, however, is not uncommon and best resolved between all parties on an amicable basis However often difficult for the parties to see the way out

If you give me a call or email I can advise - see link below for my Boardroom Resolution service

 

[Penpusher]

Thanks Dispute Resolver it is much as I thought. Its one thing to remove a director for activities relating to their work. Its quite another to remove them because you are no longer in a relationship with them.

But what if Y refuses to hold the meetings and gets Z to go along with him? Is there any hope with my friend?

 

[The Resolver]

Y cannot refuse to hold a general meeting if properly called by X as shareholder

If Y does not attend or appoint a proxy then X can pass whatever resolution he wishes (eg to dismiss Y as director for misconduct) - assuming his shareholding is more than Z's even if Z attends

You have not mentioned the shareholdings but I assume, from what you imply, that X has less than 50% so, the likely action taken is that Y calls an EGM and he and Z pass a resolution to dismiss X as director

Of course he cannot remove X's shareholding so the problem will continue and the need to resolve in a sensible way persist

 

[Penpusher]

Each has a 3rd share though because the third director Z only has a minor role the income is split 50/50. This is another issue because Y is claiming that PAYE is due on the income even though, the income from contracts was sporadic, was all paid into a joint account, my friend X had no separate account for payments to be made and there is the question of whether NICs had been paid. What a mess!

 

[The Resolver]

A fair spread of issues- there is little else I can say here and suggest X gives me a call