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Max Lowry
Max Lowry, Advocate
Category: UK Law
Satisfied Customers: 1400
Experience:  LLB, 10 years post qualification experience
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Hi, can a shareholder of a limited company overule a director and stop the running of a bu

Customer Question

Hi, can a shareholder of a limited company overule a director and stop the running of a business

What legally can i do to stop him, he has no say in the day to day runnings of the company

He has taken items from the limited company so i as the director cannot operate the business
Submitted: 1 year ago.
Category: UK Law
Expert:  Max Lowry replied 1 year ago.

Max Lowry :

Hi, welcome to Just Answer. I will help you with your question.

Max Lowry :

The answer to your question is "it depends".

Max Lowry :

Ordinarily, shareholders are investors in the company, and the directors are its managers. However certain percentages of shareholders can direct the directors/the company to do things, including the removal of the director(s) concerned. So, resolutions can be passed by the shareholders requiring certain business decisions etc. to be taken.

Customer : Can u elaborate more??
Max Lowry :

What percentage shareholding do you have/have with others that would vote in your favour?

Customer : Ok we both have 50 percent
Max Lowry :

Oh, I see, so it's a deadlock scenario really? Are you a director with a fellow director and equal shareholders?

Max Lowry :

50% votes one way and 50% votes the other way, right?

Customer : i manage this business so its my only income he works for bhs
Customer : Yeah 50/50 split
Max Lowry :

Okay - and you set up together on a business venture?

Customer : then he took items from the limited company so i cannot run it
Max Lowry :

What do you mean by took items?

Max Lowry :

The usual position, is that you have to end the company and start up again, either by agreement or through a Court petition.

Max Lowry :

HOWEVER

Max Lowry :

If he has done things which are in breach of his obligations to the company, and/or unlawful, then you might have a claim for what is known as "unfair prejudice" to a shareholder.

Max Lowry :

This is based on s.994 of the Companies Act 2006. It would mean that you have the right to ask the Court to force him to sell his shares to you, or for him to be ordered to buy your shares (which the the more usual order).

Customer : Is there anything i can do to stop him doing these things, i called police they said its a civil matter, but if the limited company is a seperate body is that breaking the law
Max Lowry :

However, under s.994, the Court has absolute discretion to do what it consider most fair.

Max Lowry :

He may be in breach of his duties, and there are things you can do, but to be honest, they're often very expensive to do.

Max Lowry :

Are you a director?

Max Lowry :

If so, could start court proceedings in the company's name against him to return property belonging to it etc.

Max Lowry :

But, as you're both 50:50 shareholders, truth is, the only way to resolve this long term is to part ways.

Customer : To be honest its probably best if we sell up, but i want to continue trading till we do
Max Lowry :

Okay, well, I can tell you now, there are things you can do, but the cost is likely to be expensive. It always is with this type of thing, and the best thing to do is to wind the company up now and try to buy the business from the liquidator.

Max Lowry :

Have a look at this for shareholder dispute information and using s.994 as I mentioned: http://www.ashfords.co.uk/news/shareholders_disputes_guide

Customer : If he comes down today to stop me opening the business can i stop him in anyway
Max Lowry :

Yes, just send him away. The police will say it's a civil matter and prevent a breach of the peace. But, equally, tomorrow (assuming he has the keys!) he could do the same to you.

Max Lowry :

This is why long term, it has to be managed properly via the Courts if you can't agree. The police will only interfere to prevent disorder.

Customer : Dont i have any powers as a director to run the business??
Max Lowry :

Yes, all directors have the same powers to run the business, unless you agree otherwise.

Max Lowry :

Does this answer your question?

Customer : so basically i cant do anything if he want to do things to the business im powerless
Customer : unless i go to court
Max Lowry :

You can play him at his own game - but it's a mess unless you go to Court, yes.

Max Lowry :

This is why people often enter shareholders agreements in 50:50 relationships.

Customer : Ok fair enough
Customer : thanks
Max Lowry :

Thank you - if you need more info later, just come back to this page, and I'll answer them for you.

Max Lowry :

Please remember to rate the answer for me.

Max Lowry :

I hope this answers your question. If you need further information, just let me know. Please do remember to rate my answer as highly as you can.

Max Lowry :

One more thought ....

Max Lowry :

You could make a complaint on behalf of the company that things were taken unlawfully from it (i.e. stolen!). The police then could become involved. They might take some serious arm twisting though as they may continue to say it's a civil claim, but in theory, you should be able to make a complaint on behalf of the company - not in your own right.

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