One for the lawyers

[JazD]

Hi all,
Where to start on this one...I part own a business with 3 other people and we'd formed a company with equal shares etc before starting the business. It turns out that the shareholder tasked with running the business on a day to day basis has been on the take to the tune of a good few thousand. We've been mulling over the options (extreme violence, fraud squad, all suggestions welcome!) but the question is where do we stand in terms of getting shot of him from the company - can we force him to hand over his shares given the situation? The proof of theft is pretty conclusive.
Cheers
D

[Jasandjules]

What do the articles of association say about any criminal actions of any director?

[JazD]

I don't think there is any agreement like that. We've all been friends for over twenty years so didn't think there would be a need. I guess extreme violence is in order then..

[Soovy]

JazD said:

I don't think there is any agreement like that. We've all been friends for over twenty years so didn't think there would be a need. I guess extreme violence is in order then..

Well you're stuffed then.

Why on EARTH didn't you document this properly? Oh, let me guess, lawyers too expensive.

[RJDM3]

Is this person a director? If so what agreed draw are you all allowed to take? was this committed to writing. Is he taking money from proifts or putting the company in debt

[JazD]

Soovy said:

JazD said:

I don't think there is any agreement like that. We've all been friends for over twenty years so didn't think there would be a need. I guess extreme violence is in order then..

Well you're stuffed then.

Why on EARTH didn't you document this properly? Oh, let me guess, lawyers too expensive.

Not at all; We did take legal advice. I've just spoken to the Company Secretary and it appears that there is that clause. I guess the next step is to call the fraud squad in. What a shame.
In response to another post - he's put the company into debt as a result of his actions

[therealpigdog]

I'm guessing that you don't have a shareholders' agreement, are using standard articles of association and nothing in the service contract (if any) - in which case you can always apply to the court to wind up the company, or alternatively to force him to sell his shares to you, and at the same time recompense the company for its loss.

It is going to get expensive from hereon in unless you can persuade him to transfer the shares and be on his merry way (and if you can, you want a full and final settlement deed).

There is a reason why we recomend shareholders' agreements - unfortunately you are it. Sorry to hear about it and hope you get it sorted. Take proper advice asap before things get out of hand.

[Jasandjules]

JazD said:

I don't think there is any agreement like that. We've all been friends for over twenty years so didn't think there would be a need. I guess extreme violence is in order then..

I am afraid you have fallen in the trap that many, many people do, trusting friends and mixing business with pleasure.

If you are involved in law in any way, you see hundreds of cases like this, so soon don't mix business and pleasure.

So, I think your best bet is to talk to the fellow, hope he doesn't know where he stands, and tell him that you'll be off to plod unless he agrees to transfer his shares now, and get the feck away from you from now on.

[plg101]

JazD said:

Hi all,
Where to start on this one...I part own a business with 3 other people and we'd formed a company with equal shares etc before starting the business. It turns out that the shareholder tasked with running the business on a day to day basis has been on the take to the tune of a good few thousand. We've been mulling over the options (extreme violence, fraud squad, all suggestions welcome!) but the question is where do we stand in terms of getting shot of him from the company - can we force him to hand over his shares given the situation? The proof of theft is pretty conclusive.
Cheers
D

If you haven't anything overly formalised then I'd call an meeting of the directors somewhere neutral. Have a witness, someone independent that isn't any of the directors immediate friends. Ask him to run the meeting and keep it objective. Present the facts as you see them to the 3rd director and give him a chance to explain without him feeling like it's a stitch up.

Depending on the outcome, your call.... police would probably view as a civil matter.


Depending on you agreement over the banking arrangements, you could remove him as a signatory, recover the lost amounts from the subsequent month incomes and then offer to either buy him out, or reduce him to employee status working for the directors? Certainly would be removing his access to the funds and move to 2 signatures on the cheques...

If you still want to work with him, then draw up an ongoing agreement with a lawyer and tighten up your governance and business reviews. Might be worth paying for a 3rd party company secretary to report on all finances so you have an independent view.

[JazD]

Thanks all for the prompt advice. This has been a real eye opener. I guess we'll threaten legal action to see if he'll hand over his shares and we then try and rebuild the business. It wouldn't surprise me if he does a runner in the meantime

[shirt]

whats the ownership structure?

my dad was a joint director in a company where one of his partners was on the take. he and the remaining partner transferred assets and resigned from the company, leaving matey high & dry. not too sure how he did it exactly but can always ask.

depending on what he's been doing, you may also need to inform the VAT man. dad had to do this and was landed with a bill for an additional £67k.

[JazD]

plg101 said:

JazD said:

Hi all,
Where to start on this one...I part own a business with 3 other people and we'd formed a company with equal shares etc before starting the business. It turns out that the shareholder tasked with running the business on a day to day basis has been on the take to the tune of a good few thousand. We've been mulling over the options (extreme violence, fraud squad, all suggestions welcome!) but the question is where do we stand in terms of getting shot of him from the company - can we force him to hand over his shares given the situation? The proof of theft is pretty conclusive.
Cheers
D

If you haven't anything overly formalised then I'd call an meeting of the directors somewhere neutral. Have a witness, someone independent that isn't any of the directors immediate friends. Ask him to run the meeting and keep it objective. Present the facts as you see them to the 3rd director and give him a chance to explain without him feeling like it's a stitch up.

Depending on the outcome, your call.... police would probably view as a civil matter.


Depending on you agreement over the banking arrangements, you could remove him as a signatory, recover the lost amounts from the subsequent month incomes and then offer to either buy him out, or reduce him to employee status working for the directors? Certainly would be removing his access to the funds and move to 2 signatures on the cheques...

If you still want to work with him, then draw up an ongoing agreement with a lawyer and tighten up your governance and business reviews. Might be worth paying for a 3rd party company secretary to report on all finances so you have an independent view.

We've taken the necessary steps to remove him from the list of signatories and as for working with him in the future, I think we'd prefer that we never see or hear from him again

[JazD]

anonymous said:

[redacted]

It does seem that way. He's going to check that out and let me know asap given that I don't have the paperwork to hand and we're redecorating so the house is tip. The debts accrued so far are to suppliers and not to the bank

[JazD]

Thanks again to all of you. Given that the business in question is a pub, the drinks will be on me