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Jenny
Jenny, Solicitor
Category: Law
Satisfied Customers: 6305
Experience:  Qualified Solicitor specialising in Employment Law and general legal matters. Please start your question For Jenny Only
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I am a Director of a UK Ltd company and there is

Customer Question

Hello,
I am a Director of a UK Ltd company and there is one other Director, we both have 50/50 of the shares.
The company specialises in I.T, where I am responsible for the product development (i am a programmer) and the other Director is responsible for sales and marketing (he has no I.T skills). He however has not been getting any results over the last 12 months with sales, so the business is in debt and not doing so well and I have concerns about what he's been doing.
Because of this, I have employed a marketing consultant to come into the business and help get it back on it's feet - but meanwhile I am unable to take my full pay and am concerned that the business cannot afford to pay me in the months to come.
To protect myself I am looking to do other work away from this business and gain my own clients as a freelancer, or indeed set-up a new business of my own in-case my partner still isn't able to bring new work in for us. I have been upfront and honest with the other Director and he doesn't seem happy, probably because he knows I can do it all myself.
I want to simply make sure that from a legal standpoint I am doing nothing wrong here and that as long as I don't touch the existing client base which we both have a 50/50 right to then I can continue.
Any advice would be good!
Cheers
Submitted: 10 months ago.
Category: Law
Expert:  Jenny replied 10 months ago.
Hello my name is ***** ***** I am happy to help you today. Do you have a Directors service agreement or a employment contract with the company?
Customer: replied 10 months ago.
Hi JennyThanks for coming back to me. I hope you are well.No we have neither in place, just a mutual understanding that we take the same salary each month.Kind regards,Paul
Expert:  Jenny replied 10 months ago.
Is your new business venture going to be in competition with the current business?
Customer: replied 10 months ago.
It's in-line with my skillset so yes it will be in the same industry
Expert:  Jenny replied 10 months ago.
Is your current company likely to suffer a loss of future business as a result of this?
Customer: replied 10 months ago.
Absolutely not, it's a saturated market and where the current one cannot charge less than £40 per hour and looks for large corporate customers. my new venture would be going in at a rate to support just me so half of that and id be looking to pick up the small fry. Also i would offer a range of products that the current one doesnt.
Customer: replied 10 months ago.
I could target different sectors with the new one to make sure of that
Expert:  Jenny replied 10 months ago.
that's a good idea. My main concern is that under the Companies Act you owe a fiduciary duty to act in the best interest of your company and not to do anything which could be considered to amount to a conflict of interest. If you do and the company suffers a loss the company can take action against you in the court in breach of those sections. To be completely safe you would need to either resign as a director or get express agreement from the current company that these activities are acceptable and agreed.
Customer: replied 10 months ago.
Ok thanks. As the company is already making a large loss and im not being paid does this give me any further leverage?
Customer: replied 10 months ago.
I suppose im wanting to retain the share in the business as ive built it up, but detatch from the useless partner :-)
Expert:  Jenny replied 10 months ago.
no the fact that the company is making a loss and you are not being paid makes no difference. Are there only 2 directors? What shareholding do you have?
Customer: replied 10 months ago.
Yes there are only 4 people in the business, we have 1 share each.
Expert:  Jenny replied 10 months ago.
are they equal shares?
Customer: replied 10 months ago.
Yes totally equal
Expert:  Jenny replied 10 months ago.
Are all 4 Directors?
Customer: replied 10 months ago.
No two are employees
Expert:  Jenny replied 10 months ago.
ok thanks, ***** ***** consider whether to call a meeting of the company to see if you can remove the other director that way the problem will be removed and you would not be at risk of being in breach of fiduciary duties in respect of the other business. This could be achieved by ordinary resolution of the company on a majority vote but you would need to give the other director special notice of the proposed resolution. To be honest in your situation I would sit down face to face with a commercial lawyer to discuss your options in detail. If you have any further questions please do ask. I would be grateful if you would take the time to rate my answer as I am not otherwise credited for my time. Thank you and all the best.
Jenny, Solicitor
Category: Law
Satisfied Customers: 6305
Experience: Qualified Solicitor specialising in Employment Law and general legal matters. Please start your question For Jenny Only
Jenny and other Law Specialists are ready to help you
Customer: replied 10 months ago.
Thanks Jenny, I have rated you on what I can from this short conversation. Thanks for being so quick.Just one last thought before I leave you alone, if I sell my share to my wife-to-be, does this free me up to continue doing what I want legally?
Expert:  Jenny replied 10 months ago.
No these a directors obligations not shareholders. The only way would be to resign as a director which you have indicated you do not want to do?
Customer: replied 10 months ago.
ok, so if I appoint her as a director but keep my shares and then resign myself then that would do it?It wouldn't make any difference to us if it was her or my name on it in reality
Expert:  Jenny replied 10 months ago.
It might do but the company would need to vote to appoint her as a director, i am not sure that this would be beneficial to you anyway.
Customer: replied 10 months ago.
That would be fine, I could sort that out. I think this is my best option, thanks!
Expert:  Jenny replied 10 months ago.
ok no problem. Good luck with it.

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