Dear Sir/Madame I had an inquiry that I would like to know whether Owner 2 has breached a clause within the shareholders agreement by committing a conflict of interest against Owner 1. See case scenario below:
* Owner 1 (Founder & CEO) has set up a company in 2010 and in doing so has already made multiple capital expenditures in acquiring all of the company physical assets.
* Owner 2 (CFO: with a MSc. Finance and Investment) has since become a 50% shareholder of the company in 2013 and in doing so has agreed to invest capital (henceforth the “Bootstrap Funds”) into the company. Less than 5% of this Bootstrap Fund has been used as a capital call during a 20 month period. -
* Asset Depreciation: If Owner 2 (CFO) over this 20 month period fails to include any depreciation (the decrease in value of assets (fair value depreciation)) on assets in the company profit/loss accounts, what would the financial effect be on Owner 1 who has solely invested into all of the company assets, and would this failure of including depreciation on the profit/loss accounts be positive or negative for Owner 1?
I look forward to your response