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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
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I am a Director of a company which was incorporated in 2010.

Resolved Question:

I am a Director of a company which was incorporated in 2010. When we formed there were 100 ordinary shares, these were split equally between two directors (50 shares each). No share certificates were issued confirming this, however it was noted at companies house.

Due to the 2nd directors poor credit score and recent ccj negatively impacting the business, it was mutually agreed that they resign as a company director and relinquish their shareholding. No money exchanged hands as the business wasn't making any.

This change was noted on companies house, however no share transfer form was completed or share certificates issued reflecting this change.

Since this event the financial position of the business has changed considerably. I as the sole director and shareholder issued a further 100 ordinary shares in the business, I gave these to a new director and shareholder which I appointed, I issued share certificates reflecting this. The structure of the business is now made up of two director/shareholders with a 50% stake, holding 100 ordinary shares each.

The original director/shareholder who was terminated continues to carry out some casual work for us. When she is in the office she is disruptive, argumentative and extremely confrontational. Morale is affected and she is having a negative impact on the day to day running of the business. She refuses to do the work she is there to do and holds us to ransom, she is highly specialised in her field and is the only one in the business who has the knowledge to complete the work we give her. Should she disagree with anything she leaves the office and workload, never knowing when she will return.

We can't continue to run the business like this, on Friday there was a confrontation between myself and her. She became violent and I asked her to leave the office. I don't want her to return, there is no contract of employment, we pay her on a self employed basis.

My questions are:

1. Can we simply ask her not to return. Are we opening ourselves up to an unfair dismissal claim or other legal issues?

2. Does she still have a stake in the business? If this is the case, shall the other shareholder and I issue a large number of shares to dilute her holding of 50?

If you could assist that would be appreciated.

Many Thanks
Submitted: 2 years ago.
Category: Law
Expert:  Ash replied 2 years ago.

Alex Watts :

Hello my name is XXXXX XXXXX I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return. There is no need to wait here, you will get an email when I reply.

Alex Watts :

Do you have any form of Directors/Shareholders agreement please?

Customer:

Hi Alex, I don't have a shareholders agreement from when the company was first formed with the first shareholder, however I do have an agreement now with the new shareholder.

Alex Watts :

Do you have anything in writing from the ex Director saying that they gave up their shares etc?

Customer:

Nothing at all

Alex Watts :

Ok - its good and bad news

Alex Watts :

The good news is you can ban the Director from coming.

Alex Watts :

You can stop them all together but they will always remain a shareholder

Alex Watts :

If the Director is employed then you can give notice as per any contract that exists, but if the contract does not exist you can just terminate.

Alex Watts :

They have a shareholding yes, unless they agree they have given up their shareholding.

Alex Watts :

If they accept this then there is no issue

Alex Watts :

If they do NOT accept this then you have an issue as nothing was in writing

Alex Watts :

You simply can't dilute the shares as the Director would be able to stop this under the Companies Act

Alex Watts :

The only situation in this case would be to buy the Director out

Alex Watts :

I am sorry if this is not necessarily the answer you want, nor the one I want to give you, but I have a duty to be honesr

Alex Watts :

* honest *

Alex Watts :

Can I clarify anything for you about this today please?

Alex Watts :

If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.


Please remember that I am always happy to help if you have future questions, even if I am in Court I can normally respond within a few hours. For future information, please start them with ‘For Alex W’.


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Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience: Solicitor with 5+ years experience
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