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James D. Ford
James D. Ford, Solicitor
Category: Australia Law
Satisfied Customers: 1601
Experience:  Consulting Principal at Nexus Law Group
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Pty Ltd Company has 2 directors (30/70 shares and profit

Customer Question

Pty Ltd Company has 2 directors (30/70 shares and profit shares) in a new company ( a few months- it replaced a prior partnership agreement)
The 70% share holder also owns all rights to the products and services sold. Without those the company would fold quickly.
When set up the 70% share holder was given the job of General Manager of the company however a salary for this was not specified in the company agreement. Therefore the 70% director is doing all the work, as well as developing everything sold. The 30% director gets 30$ share but doesnt have to actually do anything. These issues need rectifying.
If not, the 70% director will resign and take withdraw permission for the company to produce and distribute his products and the company will be closed down. He will just sell them through as a sole trader. This option to withdraw the rights to product and distribute is included in the company agreement and signed by both parties But this is not what the 70% person wants, just to be paid for the role as Managing Director. If working for another company the director would take over $100K for a similar role.
This has been a contentious issue for some time. The 70% director didnt even get any time off at Xmas :-)
I have seen that, to amend the structure of the company and have the General Manager paid for his time and efforts, that a meeting needs to be called. As there are only 2 people involved in the company, not even an appointed secretary, can the 70% director send a letter for the 30% director to sign, to agree to the company appointing the other director as an employee- there would be a contract of course, specifying Super etc..
The 30% director doesnt want that as that $100k comes from the 30% profits he has been enjoying. What is the easiest way to remedy this. . If the 70% director is at least being paid, most of the other issues will be resolved.
The 70% director is in a different country, not Australia, even though ordinarily an Australian resident, and has his house there.
Submitted: 1 year ago.
Category: Australia Law
Customer: replied 1 year ago.
Please could I have a different lawyer from before, just to get a different perspective, even though I appreciate previous responses.
Expert:  James D. Ford replied 1 year ago.

Hi, can you please advise whether you have a Shareholders Agreement? (is this what you have called the company agreement?) and if not, why not?

If you resign and withdraw permission - what grounds would you us to justify this withdrawal of permission? you say that this option exists within the company agreement.. are you 100% confident that the company/other shareholder would not have grounds for a legal action against you? or grounds to claim compensation for damages/losses?

Please provide the wording of this option? even better - I will send you an offer of additional service, so we can exchange details and you can forward the entire company agreement, so I can review and offer you feedback, and we can discuss the situation over the phone.

The problem you have regarding the decision by the directors regarding employment of yourself... is that any vote of the directors... (if it involves you) will inherently contain a conflict of interest.. as you would be voting on something that could be shown to benefit you personally..

Have you considered buying this shareholder out of their 30% share?

The solution may also reside in taking steps to remove the other director? does the company agreement state anything in this regard? though, even if this was successful, you still would owe a duty to all shareholders to act in the best interests of the company.... (not yourself personally)...

What does the company agreement say about either of the shareholders working in the business? or buying out the other shareholder?

Another solution may reside in amending the company agreement (if this is required)... by agreement of both shareholders..

Kind regards,

James

Customer: replied 1 year ago.
Can I take up this offer but you then respond by email ? - not phone? It would certainly help you to see the Memorandum of Agreement outlining the share holders and info about the running of the business, and also the specific reference to the company having no license or distribution rights to the products sold.No, I would not withdraw permission without first resigning as director as a conflict of interest . But that is not what I want from this- I want to just get paid for the role I am undertaking as General Manager. I want to do it quickly, without needing to have a directors meeting as we are in different countries and not working together well at the moment.
Expert:  James D. Ford replied 1 year ago.

Yes, I can respond by email - if you take up the offer. Kind regards, James

Customer: replied 1 year ago.
For some reason the link it not live/ clickable - could you resend please. I might have declined it yesterday before asking to send you the doc for email comment. Thanks
Expert:  James D. Ford replied 1 year ago.

I have resent the offer.. let me know how you go? Cheers, James