company law & shareholders
Discussion
Folks, i'm after some help on the legal side of things here:
Ltd company set up 6 years ago, with 5 equal 20% shareholders. One director leaves after 6 months, retaining his shares, but gets his existing clients to cancel business (which he had originally written while with us, & was paid in full) leaving us with a £25k loss. Also has an outstanding directors loan for £6k which he has never paid.
Over the years he has made himself a general pain in the ass & is now demanding company accounts & meeting minutes etc. I realise the law says we should provide this, but he is now employed by a direct competitor of ours & our auditor/accountant says that there is no way he should be given access to sensitive company information.
Is there any way we can legally refuse to supply on the grounds that he is out to harm our company? As directors i believe that we have an duty to protect the interests of the company (& our own). If anyone is up on company law & could point me in the directon of a legal "
you", i would be most grateful.
Ltd company set up 6 years ago, with 5 equal 20% shareholders. One director leaves after 6 months, retaining his shares, but gets his existing clients to cancel business (which he had originally written while with us, & was paid in full) leaving us with a £25k loss. Also has an outstanding directors loan for £6k which he has never paid.
Over the years he has made himself a general pain in the ass & is now demanding company accounts & meeting minutes etc. I realise the law says we should provide this, but he is now employed by a direct competitor of ours & our auditor/accountant says that there is no way he should be given access to sensitive company information.
Is there any way we can legally refuse to supply on the grounds that he is out to harm our company? As directors i believe that we have an duty to protect the interests of the company (& our own). If anyone is up on company law & could point me in the directon of a legal "
you", i would be most grateful.
sorry not very helpful was itEric Mc said:
Exactly.
Wind up the current company and start up again with a new one - even using the same name if necessary.
Wind up the current company and start up again with a new one - even using the same name if necessary.
We could, but we are a regulated financial services entity. Could we just start a new company (same name same everything, right down to the stationary?) & transfer all of the assets from the old & the dissolve?
maven said:
Issue shares.
If you still have pre-emption rights in the company's articles (most likely, although you can hold an EGM to have these modified, not sure if you have a quorum with 4 out of 5 members, I think it depends on your Mem & Arts, extremely rusty with this so do your due diligence), then you will need to offer them to him too, to ensure he keeps his 20%. If he continues to buy into the company, issue more (assuming that this company is important to you, given you have FSA authorisation). The bigger his investment in the company, the more he has to lose.
If he doesn't take up his share offers, you can dilute his holding, to, I believe, 90% and go for a compulsory share purchase. IIRC the 90% holding shareholder will need to be one entity, so perhaps a restructure with a new company as your single shareholder, with each of you owning a 25% stake in the new company that purchases the shares of your old one.
Speak to a professional in this field and motion their advice, although you can present to them a scenario such as the above as a suggestion. My experience with shareholdings is rusty at best, and for a valuable company spend the money to ensure it is done correctly.
Good luck.
If you still have pre-emption rights in the company's articles (most likely, although you can hold an EGM to have these modified, not sure if you have a quorum with 4 out of 5 members, I think it depends on your Mem & Arts, extremely rusty with this so do your due diligence), then you will need to offer them to him too, to ensure he keeps his 20%. If he continues to buy into the company, issue more (assuming that this company is important to you, given you have FSA authorisation). The bigger his investment in the company, the more he has to lose.
If he doesn't take up his share offers, you can dilute his holding, to, I believe, 90% and go for a compulsory share purchase. IIRC the 90% holding shareholder will need to be one entity, so perhaps a restructure with a new company as your single shareholder, with each of you owning a 25% stake in the new company that purchases the shares of your old one.
Speak to a professional in this field and motion their advice, although you can present to them a scenario such as the above as a suggestion. My experience with shareholdings is rusty at best, and for a valuable company spend the money to ensure it is done correctly.
Good luck.
Is this anything like putting a "call" on the shares? If i've understood our mem & arts correctly, we could call on shareholders to invest further funds into the comapany (say 20k each), knowing that our pain in the ass won't do this. The mem & arts then state that any shareholder who does not comply with a call within 14 days will be liable to forfeit their shareholding back to the company. As the rest of the shareholders are all directors, we would be happy to do this.
I agree that we will need to seek legal advice though. I just don't want to spend 10k on advice to save 5K, if you know what i mean.
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