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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3671
Experience:  Solicitors 2 years plus PQE
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A friend is a Director/Shareholder (49%) in Private Limited

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A friend is a Director/Shareholder (49%) in Private Limited company, it is a holding company which has 90% shares in another company. Up until a year ago he was also a Director of the subsidiary company from which position he was removed.
He has asked to see the the Full Accounts for the subsidiary company but has been told that as he does not have any shares in the subsidiary then he does not have the authority to do so. Is this correct?
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Technically this is correct, the accounts are really only for the view of the directors. Your friend has a 49% stake in the beneficial interest of 90% of the holding company. Who owns the other 51% of the company in which he is a direct shareholder? Is he in dispute with the person?
Customer: replied 2 years ago.
The other 51% of the shares are split 49/2 between another Director and the Company Secretary.
My friend is not legally in dispute with his former company (there are a lot of emails threatening action on all sides) however he was trying to find out the financial state of the subsidiary which will affect the share price. The other 49% Director has asked to buy the shares but I do not think any firm offer has been made.
I am surprised that a major shareholder of a company is not entitled to see what he owns, but if that is the case then I think my friend will have to drop his requests and review the situation.
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
He is allowed to see the financial statements (in practice because he has a large beneficial interest in the subsidiary) and really the subsidiary should do it without question, but if they are going to refuse he needs to go through formal channels. In technical legal terms only the directors can see the financial statements - but in practice majority shareholders could force directors to deliver up the information by changing the company constitution.
Such channels could involve using the holding company to vote and remove the directors of the subsidiary but in order to do this he would have to have the agreement of the shareholders of the holding to allow holding company to vote to remove those directors.
The problem he has is his interest is a beneficial interest in the holding company therefore if he wants the directors of the subsidiary to deliver up financial information, he will have to go through a formal company process of shareholder voting.
Can you tell me who is telling him he cannot see the company financial information?
Kind regards
AJ
Customer: replied 2 years ago.

AJ,

Thanks for the info so far. The other Director of the Holding Co. is also a Director of the Subsidiary as is his wife and basically they now control that company and it was they who forced my friend to relinquish his directorship and resign from his job. The Solicitors acting for the Subsidiary company are saying that my friend does not hold shares directly in Sub .Co. and therefore he is not entitled to request the information. Since MF(my friend) will be outvoted by the other two Directors in the Holding Co. I do not see an easy way forward.

I will talk to MF and let him know your advice so far.

Regards

Alan

Expert:  Alex J. replied 2 years ago.
Hi
Thank you.
Would the company secretary support your friend?
If they are deliberately stopping him from looking at he company records and taking benefit of the holding company's asset (ie the subsidiary) he may have a claim for unfair prejudice under s.994 of the Companies Act 2006.
What does he actually want to achieve in the long run? Have his shares bought at a fair price?
Kind regards
AJ
Customer: replied 2 years ago.
AJ,
After a long talk with my friend he has decided to let the matter drop, so I would like to say thank you for your responses which have helped greatly.
Please close the case.
Regards
Alan
Expert:  Alex J. replied 2 years ago.
Hi
No problem
I wish you the best of luck.
Please do not hesitate to contact me if I can assist any further.
Kind regards
AJ
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