Do I have the right to see legal advice paid for by me?
Discussion
Apologies, if this would be better posted elsewhere, mods please move if necessary.
I own a share of the freehold in a block of flats. There are 15 flats, I own one flat, therefore I own 6.666% of the freehold.
In common with a lot of properties like this, the management of the building and grounds is run by a limited residents' company and each of the flat owners own a share of that company, so I own 6.666% of that company. There are 3 directors of the company, each of whom is an equal shareholder.
I've just seen the 2017/18 accounts and one or more of the directors have incurred legal expenses (for which the company/shareholders have paid) in excess of £3k for 'legal opinion as to directors' responsibilities, rights and tenure'. I understand from another shareholder that there might have been a challenge to one of the directors by a number of shareholders and he has obtained legal advice to determine his position.
My question is, am I and the other shareholders entitled to see in writing this legal advice along with the invoices relating to it? I intend to request this, but I'm anticipating that it will be refused, if so are the directors within their rights to refuse to provide this?
I would be most grateful for any guidance please, many thanks.
I own a share of the freehold in a block of flats. There are 15 flats, I own one flat, therefore I own 6.666% of the freehold.
In common with a lot of properties like this, the management of the building and grounds is run by a limited residents' company and each of the flat owners own a share of that company, so I own 6.666% of that company. There are 3 directors of the company, each of whom is an equal shareholder.
I've just seen the 2017/18 accounts and one or more of the directors have incurred legal expenses (for which the company/shareholders have paid) in excess of £3k for 'legal opinion as to directors' responsibilities, rights and tenure'. I understand from another shareholder that there might have been a challenge to one of the directors by a number of shareholders and he has obtained legal advice to determine his position.
My question is, am I and the other shareholders entitled to see in writing this legal advice along with the invoices relating to it? I intend to request this, but I'm anticipating that it will be refused, if so are the directors within their rights to refuse to provide this?
I would be most grateful for any guidance please, many thanks.
Ok this has pricked my cynical radar.
I agree it's not unusual to have residents deal with their own management and setup this sort of limited company. Now i imagine it should run in a sort of non profit altruistic way, you need to cover the annual cyclical costs and build up reserves for major costs (sinking funds?)
On the face of it a owner occupier director recharging legal costs (that you describe) to everyone stinks, but going back further, in my mind it should be a borderline hassle to be involved in such a management company ie you get some financial recompense but it shouldn't be significant imo. So this raises the question if some were trying to force them out why didn't they just say, fair enough you try doing it and see how you like it? Unless somehow there is more in it for them than at first it appears.
What was the nature of complaint/challenge by the residents?
I agree it's not unusual to have residents deal with their own management and setup this sort of limited company. Now i imagine it should run in a sort of non profit altruistic way, you need to cover the annual cyclical costs and build up reserves for major costs (sinking funds?)
On the face of it a owner occupier director recharging legal costs (that you describe) to everyone stinks, but going back further, in my mind it should be a borderline hassle to be involved in such a management company ie you get some financial recompense but it shouldn't be significant imo. So this raises the question if some were trying to force them out why didn't they just say, fair enough you try doing it and see how you like it? Unless somehow there is more in it for them than at first it appears.
What was the nature of complaint/challenge by the residents?
Many thanks for your replies.
I'm uncertain of the exact nature of the complaint/grievance but arrogance and incompatible personalities are in force.
You're right Scootersp that under circumstances such as this the challenged director would usually throw the towel in, but loss of face is in force here.
JulianPH, yes I'm going to ask for the details of the legal advice requested, the replies from the lawyers and their invoices and I'll see what reaction I get.
I'll post up what happens.
I'm uncertain of the exact nature of the complaint/grievance but arrogance and incompatible personalities are in force.
You're right Scootersp that under circumstances such as this the challenged director would usually throw the towel in, but loss of face is in force here.
JulianPH, yes I'm going to ask for the details of the legal advice requested, the replies from the lawyers and their invoices and I'll see what reaction I get.
I'll post up what happens.
Well, I asked and was told to foxtrot oscar as they told me that the 2006 Companies Act and the firm's Articles of Association didn't make it incumbent on the directors to provide me with the information.
The AofAs do say that words to that effect, but I understand that in the event the 2006 CA says that shareholders are entitled to receive what I asked for then that overrides whatever the AofA say.
Does anyone know if the 2006 CA gives shareholders entitlement to see legal advice paid for by them, the shareholders? I, along with a few other shareholders are contemplating seeking legal advice but our quandary is if we do and are advised that we do have the right, when we challenge them, the directors will seek further legal advice for which we, the shareholders will end up paying.
Thanks for anyone's help.
The AofAs do say that words to that effect, but I understand that in the event the 2006 CA says that shareholders are entitled to receive what I asked for then that overrides whatever the AofA say.
Does anyone know if the 2006 CA gives shareholders entitlement to see legal advice paid for by them, the shareholders? I, along with a few other shareholders are contemplating seeking legal advice but our quandary is if we do and are advised that we do have the right, when we challenge them, the directors will seek further legal advice for which we, the shareholders will end up paying.
Thanks for anyone's help.
The Companies Act is complex - and I am not an expert.
But I would have thought that shareholders have different rights to directors - in terms of 'seeing all documents' for example. If you were a shareholder of Amazon, you wouldn't expect to see the details of corporate advice given to Bezos. Whilst the management company is a minnow in comparison compared to Amazon, I guess the same would apply.
Do you have a right to be elected as a director? Are you allowed to see the minutes of board meetings?
ETA - I assume you've looked at the Articles of Association/Shareholders Agreement here:
https://beta.companieshouse.gov.uk
But I would have thought that shareholders have different rights to directors - in terms of 'seeing all documents' for example. If you were a shareholder of Amazon, you wouldn't expect to see the details of corporate advice given to Bezos. Whilst the management company is a minnow in comparison compared to Amazon, I guess the same would apply.
Do you have a right to be elected as a director? Are you allowed to see the minutes of board meetings?
ETA - I assume you've looked at the Articles of Association/Shareholders Agreement here:
https://beta.companieshouse.gov.uk
Are other shareholders equally concerned about this spending which the current directors want to keep under wraps?
If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
Thanks NDA.
I do have a printed copy of the AofA and they give the directors pretty much carte blanche to do as they please, the AofA originated in 1994. This is why I was wondering if the 2006 CA overrode them.
The exact wording on the AofA regarding the accounts say:
'The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by statute or by the Directors or by the company in general meeting'
As you can see from that we are denied access unless the law provides for it.
I think I do have the right to be appointed to be a director, but I don't wish to become one.
Thanks again.
I do have a printed copy of the AofA and they give the directors pretty much carte blanche to do as they please, the AofA originated in 1994. This is why I was wondering if the 2006 CA overrode them.
The exact wording on the AofA regarding the accounts say:
'The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being Directors, and no member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by statute or by the Directors or by the company in general meeting'
As you can see from that we are denied access unless the law provides for it.
I think I do have the right to be appointed to be a director, but I don't wish to become one.
Thanks again.
PF62 said:
Are other shareholders equally concerned about this spending which the current directors want to keep under wraps?
If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
Hi, and many thanks.If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
There are only 13 shareholders in total and I know that at least 4 share my view. We don't necessarily want to get rid of the directors, but if that's what it takes to get more transparency then that's the avenue we'll go down.
PF62 said:
Are other shareholders equally concerned about this spending which the current directors want to keep under wraps?
If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
This. S168 CA requires a majority (over 50%) of people voting, to remove a director. If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
The CA does not give you rights to the underlying records. This can only be given via a shareholders’ agreement or the articles.
You do not have a right to see the underlying legal advice. Indeed, sharing that advice widely may result in a loss of privilege, if that is important. However the directors owe a duty to the company and as shareholders you should be able to ask for details at a general meeting. If you don't like the answer your remedy as stated above is to remove the directors.
Alpinestars said:
PF62 said:
Are other shareholders equally concerned about this spending which the current directors want to keep under wraps?
If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
This. S168 CA requires a majority (over 50%) of people voting, to remove a director. If so and you could get seven of them to vote with you, then couldn't you kick the current directors out at the next AGM and appoint some new directors who are more sensible. As those directors will have access to the information they can now choose to share it.
The CA does not give you rights to the underlying records. This can only be given via a shareholders’ agreement or the articles.
Pressure on the directors if the shareholders are not happy at their spending would seem to be the way forward.
PF62 said:
Hence why I mentioned if seven others agreed with recordman as those eight would be over 50% - if there are only 13 shareholders then presumably then some own more than one flat and thus more than one share.
Pressure on the directors if the shareholders are not happy at their spending would seem to be the way forward.
Thank you all once again. It's now clear to me that we don't have a right to see the advice that we've paid for.Pressure on the directors if the shareholders are not happy at their spending would seem to be the way forward.
You're right PF62, two of the shareholders each own two flats.
We'll now have to discuss between ourselves, whether enough of us wish to take steps to remove one or more of the directors.
Appreciated!
Dont be surprised if the answer is no.
I paid 3k to a lawyer to defend someone on a dangerous driving charge and was told I could not speak about it to them or ask anything about it or see any correspondence.
This was probably to avoid me finding out they were lazy t
ts who did nowt for the money and relied on blind luck turning up a chance to negotiate a lesser sentence.
Well known Glasgow outfit as well.
I paid 3k to a lawyer to defend someone on a dangerous driving charge and was told I could not speak about it to them or ask anything about it or see any correspondence.
This was probably to avoid me finding out they were lazy t
ts who did nowt for the money and relied on blind luck turning up a chance to negotiate a lesser sentence.Well known Glasgow outfit as well.
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