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Jo C.
Jo C., Barrister
Category: Law
Satisfied Customers: 31768
Experience:  Over 5 years in practice
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On June 1 this year the MD of the majority shareholding

Customer Question

On June 1 this year the MD of the majority shareholding company of a company I started I. 1985, visited our works and tried to dismiss my two sons as Directors of the company, stating poor performance as the reason, under the shareholders agreement and Directors agreement he was not permitted to do this, I as 20% shareholder pointed this out to him and he left. During July the majority shareholder offered to pay up the contracts of my sons ( approx £150k each) and to purchase the balance of the shares, we negotiated a deal in Germany with the Chairman and both parties appeared to be satisfied. the German company dragged out the finalisation of the deal and eventually forced a due diligence on the company giving 2 hours notice. It was obvious they were looking for a reason to cancel the contracts on my sons and avoid paying the settlement, there main target was stock, and they virtually closed the company for three weeks in order to carry out the stock check, unfortunately for them the stock was over £200k higher than the records, they then switched their attentions to the expenses and eventually came up with a massive schedule of expenses they claim where unaccounted for, the vast majority proved to be genuine, and a small amount approx £4 k for each son over three years could not be accounted for. They then insisted we have a board meeting to order the suspension of my two sons, there are three directors on the board, my sons and a German representative. We consulted our legal team and initially they said the German company could not do this, but in the meantime I ordered a meeting as minority shareholder to investigate the fact that Germany had been making u I lateral decisions effecting the minority shareholder. They actually bushwhacked this meeting and convinced our legal team that we should agree to be suspended, shell shocked my sons agreed, and this is the current position my sons are on suspension and not allowed to visit the works or speak to anyone.
Regarding the expenses claim, this has been part of the business since 1985, and the German chairman has approved this with me on many occasions since, obviously it is only verbal, so my sons did not consider it was wrong. Germany have had account to annually since 1985, and in the last ten years they have had monthly accounts without a single comment regarding expenses. This is clearly a ploy to get the shares cheap and to save the settlement in my sons.
Submitted: 1 year ago.
Category: Law
Expert:  Ben Jones replied 1 year ago.

Hello, my name is***** am a qualified lawyer and it is my pleasure to assist you with your question today. What is your specific query about this please?

Customer: replied 1 year ago.
My question is what is the legality of this action, and can they dismiss my sons based on this evidence. I am 20% shareholder, under the company rules the requirement to dismiss a director other than for illegality is 83%.
Customer: replied 1 year ago.
Do you have my initial question, it was long and I do not want to go through it again.
Expert:  Ben Jones replied 1 year ago.

yes I do, going over it now

Expert:  Ben Jones replied 1 year ago.

Is there a shareholders agreement in place and does it state what percentage is needed for removal of a director?

Customer: replied 1 year ago.
83% under normal circumstances but does not cover anything considered illegal. The majority shareholder cannot appoint other directors without 83%.
Expert:  Ben Jones replied 1 year ago.

Thanks I will have to consult with a colleague on this - he is offline right now but we will get back to you at the earliest opportunity. No need to respond in the meantime. Thanks

Customer: replied 1 year ago.
Sorry, but how will I know when you respond?
Expert:  Ben Jones replied 1 year ago.

it will be on here, you should get an email too

Expert:  Alex J. replied 1 year ago.

Hi, Thank you for your question and welcome - my name is ***** ***** my colleague has asked me to assist you because I am a company law expert. There are two issues here (i) Yours sons' employment and status as directors and (ii) Their shareholding. Can you confirm they following:

(i) Are your sons paid a salary, i.e under PAYE?

(ii) Does your shareholders agreement contain any pre emption rights clause or restriction on the sale and purchase of company shares?