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JGM, Solicitor
Category: Law
Satisfied Customers: 9985
Experience:  30 years as a practising solicitor.
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I started a UK registered Private Limited Company with two

Customer Question

Attachment: 2014-12-11_082421_just_ask.pdf

I started a UK registered Private Limited Company with two other people. I was told by the Accountant assisting us (a friend of one of the people starting the Company) that the Company would have one Director, (one of my "partners").  When I asked why the three of us starting the Company were not all directors he told me that it was only possible for one of us to be a Director of the Company and that he would act as Co-Director in a capacity of Financial Director. The Company would have three Shareholders however and three shares namely being myself and my two partners. However, about a month after the Company was incorporated I still had not been shown the Articles of Association nor any documentation pertaining to the Company except the Certificate of Incorporation and a piece of paper stating the registered address of the Company. I went onto the Companies House website and downloaded all the information on the Company. The Company was initially registered with one director (one of my "partners") on 27/10/14 and the second Director (the accountant) authorised by her as a director on 10/11/14.  The company has one shareholder (the same "partner" as above) and one share.  No mention of the other two shareholders and the missing two shares.

I should add that I was putting up 50% of the startup capital for the business and had at the point of discovering all of this, invested a lot of my time, effort and care in a business I was under the impression I was co-owner of.

Please advise me if this person and her friend the accountant have acted illegally by leading me to believe that I was a partner and a shareholder in this company?  Please also advise me what recourse, if any, I am entitled to? Also, is there any ambiguity as to the shareholding in the company?

I attach company details.

Many thanks Philippa Sedgwick

Submitted: 1 year ago.
Category: Law
Expert:  JGM replied 1 year ago.
Thank you for your question.
You have certainly been given wrong information. There is nothing to prevent there being three directors of the company so that information was wrong. It also appears to be the case that you were to be made a shareholder and haven't. In reliance of that you have put money into the company sort you have been asked to put money into the company and have not received a shareholding in exchange.
As the chartered accountant was acting in a professional capacity, you have cause for complaint. You should see your own solicitor with a view to progressing this and also, if necessary, instigating civil proceedings for the return of your capital.
Happy to discuss further.
Please leave a positive response so that I am credited for my time.
Customer: replied 1 year ago.

Thank you for your reply. I had put my capital into a separate bank account, but it was never used and I have access to it. I therefore have not lost any of my monies, except for what I paid for in my personal capacity.

Does the documentation registered at Companies House make Lynne Pearson the sole owner and beneficiary of the Company? Is there any way I could be misunderstanding this to be the case?

Am I entitled to be compensated for the time and work I invested in the company (considerable) over a two month period? I feel as though I have had them stolen from me. I also travelled away from home on behalf of the business, while under the impression that I was a co-owner and shareholder.

Many thanks,

Philippa Sedgwick

Expert:  JGM replied 1 year ago.
Thank you for your reply. I am glad that your capital is safe.
The documentation lodged at companies house discloses that she is the initial director and sole shareholder with the accountants being appointed as a director shortly thereafter. Accordingly your reading of this is correct.
There is a possibility that a share has been issued in your name and you haven't yet been given the share certificate. We're that to be the case it would not show up at companies house until the next annual return for the company is lodged and that could be over a year away. In other words there is no requirement to notify a share issue to companies house when it actually happens. However the appointment of a director has to be notified immediately.
I suggest you challenge the accountant about all of this.
If you have done a lot of work for the company in the expectation that you were to be a director and shareholder, and this has not happened, you are entitled to be compensated for your work at an appropriate rate of remuneration.
JGM, Solicitor
Category: Law
Satisfied Customers: 9985
Experience: 30 years as a practising solicitor.
JGM and other Law Specialists are ready to help you
Customer: replied 1 year ago.

Again, thank you. One more question. If a share certificate was indeed issued in my name, what would be the procedure to remove me as a shareholder now that I have left the company?

Expert:  JGM replied 1 year ago.
There is no procedure to remove you as a shareholder. The company would have to buy back the share. You would be an owner of the company until an agreement was reached.
Customer: replied 1 year ago.

Thank you again. Thinking about your advice leads me to some other questions. What are the legal requirements for the conduct of a Director. If the accountant was given false information (for example about capital input) by the Director, what are the implications of that for her?

I asked her directly for all the company details and all she sent me was the Certificate of Incorporation and the registered address of the Company. Was she obliged to give me all the documents pertaining to the Company when I asked for them directly? Was she obliged to be open and up front as to the ownership of the Company.

What are the implications if she purposefully mislead me?

Expert:  JGM replied 1 year ago.
A director has fiduciary duties to the company to act honestly etc but this isn't the issue here.
The issue is between private individuals and their rights and obligations to each other in the setting up of a business by way of a limited company. So if one party didn't act in accordance with the agreement between the individuals, any consequences or litigation would be between those individuals.
So th answer to the questions raised by you is yes, she should have informed you of the position. That arises from the personal contactual relationship between the two of you as individuals.
Customer: replied 1 year ago.

OK, thank you.

Customer: replied 1 year ago.

Sorry, another question...

Is the director now obliged to answer my questions as to who the shareholders of the company were when I left?

Expert:  JGM replied 1 year ago.
Yes, if it was agreed that you were to become a director and that didn't happen.
Customer: replied 1 year ago.

It was not agreed I would be a Director. I asked why I was not going to be one and was told that in this type of company it was only possible to have one director and a financial director.

I was supposed to be a shareholder.

Expert:  JGM replied 1 year ago.
Well that was a lie to start with!
If it was agreed that you would to be a shareholder then you can ask why that didn't happen.

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