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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3613
Experience:  Solicitors 2 years plus PQE
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I wish to remove one of the directors from a business for

Customer Question

I wish to remove one of the directors from a business for gross misconduct, not acting in the interest of the company.
I believe I can go through section 303 and have her removed if the other director agrees to this (there are three of us, we wish to remove one)
Is there a process that has to be followed, we have arranged a meeting with her at 5.00 pm tonight and wish to discuss this.
Submitted: 8 months ago.
Category: Law
Expert:  Ben Jones replied 8 months ago.

Hello, my name is***** am a qualified lawyer and I will be assisting you with your question today.

Expert:  Ben Jones replied 8 months ago.

Please can you provide some background information on this. Please can you also tell me how long they have worked there for?

Customer: replied 8 months ago.
Hi BenMyself and Clare paid £20k (10k each) to buy into a furniture shop, the lady who bought this is called Maria. This was in May and since then we have had issues as she owns another business that supplies the furniture shop with a range of furniture called the curve from a site 20 miles away.She was supposed to pay debts in the business using the money and contribute essentially 10k worth as well into the business through paying of debts and we would have an overdraft of 6k and no debt.Since then we have had outstanding bills not paid by her, multiple clients coming in who have paid for goods but not received them who wish to take out court action, a large client we won through the shop she has now told us isn't having the second part of the work done but we have been told they are but through Marias other business not through the furniture shop as agreed.Essentially she isn't putting the best interests of the furniture shop forward, she is also competing and hence her duty of loyalty is in question, gross misconduct for her general attitude to clients, but also the social reputation of the shop is now so bad due to her not delivering, lying to clients about deliveries and so much so that as I said two at least are looking to take legal action which we have advised them has to be done against Maria herself or the company as thats who they purchased from.ThanksStewart
Customer: replied 8 months ago.
Sorry this is since May this year, Maria is the existing director that we bought into the business and formed a new company called the Fab Chair company ltd on 19th May of which three directors have equal share.
Expert:  Ben Jones replied 8 months ago.

OK thank you, ***** ***** it with me. I am in court today so will prepare my advice during the day and get back to you at the earliest opportunity. There is no need to wait here as you will receive an email when I have responded. Thank you.

Customer: replied 8 months ago.
Ok thanks, ***** ***** change to high priority as we have a meeting with her at 5.00 today and Id like to have some outline before then if possible.
Expert:  Ben Jones replied 8 months ago.

OK thank you for letting me know. I will aim to get back to you at the earliest opportunity. Can I just confirm that Maria has been in her position since May this year?

Customer: replied 8 months ago.
In the new company since May 19th, thats when Fab chair company ltd was formed. Before that the shop was operating as a separate business that was just her, we then paid the 20k and a new company was formed on May 19th.Hence we all started on that date.
Expert:  Ben Jones replied 8 months ago.

OK many thanks for confirming this

Expert:  Ben Jones replied 8 months ago.

having looked into this it would be more of a corporate matter than an employment one. I have forwarded this to a corporate law colleague of mine who would hopefully get back to you as soon as they can. Please do not reply to this as it will lock the question back to me and they will have difficulty accessing it to answer it, thank you

Expert:  Alex J. replied 8 months ago.

Hi, Thank you for your question and welcome. My name is ***** ***** my colleague has asked me to assist you with this. Do you have a shareholders agreement? Is she also a shareholder? Are you a company director as well?

Customer: replied 8 months ago.
Hi AlexIm a shareholder yes, all three of us are.Stewart Townsend - Me
Clare Jones - Other director
Maria - The director we want to remove.Im attaching the company registration document.Stewart
Expert:  Alex J. replied 8 months ago.

Hi, Thank you. Have there been any changes to the shareholding? Are you still all the owners of 1 share each? Does the company have any assets or just liabilities? When she took the money from you, did you confirm anything in writing -i.e that she must use it to pay company debts.

Customer: replied 8 months ago.
Hi AlexNo changes we only formed the company on May 19th. Still owners of 1 share each, we have a partner agreement that states she must put in 10k as well and that was her coverage of debts and making sure we had capital via overdraft.Assets is limited small amount of stock, she has removed some of the assets that were on the original list - Laptop missing / Cushion Covers / Fabric books - Assets gone and not soldStewart
Expert:  Alex J. replied 8 months ago.

Hi, Thank you. The problem you have here is she is not an employee so you cannot remove her for gross misconduct. You can remove her as a director under the Companies Act provisions by special resolution, and then seek to sue her personally for breaching her duties as a director under the Companies Act and misusing company funds (S.172 onward of the Companies Act). Going forward what do you want to achieve - do you just want her removed as a director or do you want her out the company altogether?

Customer: replied 8 months ago.
Out the company all together she is causing more damage to our reputation locally, with more clients looking to take us to court for breach of contracts not delivered. Also she is passing work back to herself from the shop, thus a large client that was going to do a second piece of business with the fab chair company ltd suddenly isn't, we found out from the clients son that he is having the work done but Maria is doing this through her manufacturing company and thus has taken the client away from Fab chair company ltd thus not acting in the best interests of our company.
Expert:  Alex J. replied 8 months ago.

Thank you. Realistically you would not be able to continue working with her? Would she leave voluntarily if you made an offer? Bare in mind court action these types of company claims is very expensive with no guarantee of success - if you can negotiate a settlement with her that is often the best solution. Is she aware of this issues?

Customer: replied 8 months ago.
Meeting her tonight, ideally wanted to remove her as a director today via section 303 (I think its that) where two other directors remove her.In terms of offer she has taken 20k of us and has put no money or assets back into the business that she stated she would and has since then taken this client away for another 5-8K of business.
Expert:  Alex J. replied 8 months ago.

Hi Thank you. You would not be able to remove her today as you have to give special notice of the meeting at which she will be removed. Why dont you say to her it has not worked out and ask what it will take to get her shares - you can always keep quite about the claim and sue her on behalf of the company for the money she has appropriated at a later date? Kind regards AJ

Customer: replied 8 months ago.
is that the 28 days notice, our thoughts were to ask her to remove herself quietly and give us the shares back but she can still act as a manufacturer through her other company.If she doesn't want to go that route then give her 28 days notice of the remove meeting notice today. i.e. meet in 28 days time when she will be removed by a vote by myself and other directors.
Expert:  Alex J. replied 8 months ago.

Hi, Thank you. You have to suggest option one as a starting point - you can even tacitly suggest that the company has a claim against her for mis appropriating monies. Getting bogged down in litigation with another shareholder will detract from actually running the business.

Customer: replied 8 months ago.
If she doesn't want to leave if we then remove her from companies house under that 28 day rule, does she a right to contest that and we all have to go to court ? Totally agree re bogged down at the minute the business might as well shut down and write off the investment.
Expert:  Alex J. replied 8 months ago.

Hi thank you. You can remove her as a director by ordinary resolution but you would have to go through a proper process. Call an AGM at 28 days notices, give her the chance to object at the meeting and then pass an ordinary resolution (51%) - if you go through this process then you would not have to go to court. Have you had a face to face meeting with her? Kind regards AJ

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