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kmslaw, Solicitor
Category: Australia Law
Satisfied Customers: 209
Experience:  I have 15 years legal experience behind me and I graduated from the University of Sydney with First Class Honours in Arts/Law.
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We have a small startup pty ltd australian company with 3

Customer Question

JA: Hi. What is your issue regarding?
Customer: We have a small startup pty ltd australian company with 3 directors with equal shareholding. 1 has not performed for some time and we are exploring the option to remove him. Our constitution allows for resolution by company or resolution by directors. As we are a startup and have not yet traded, we each agreed to volunteer our time. The is no money or wages or anything at this point. We have just completed our first software product and are about to go to market to allow subscription to the product. Should we deal with the issue now before revenue comes into the company or does it make no difference.
JA: What state are you in? It matters because laws vary by location.
Customer: Qld
JA: Has anything been filed or reported?
Customer: no
JA: Anything else you want the lawyer to know before I connect you?
Customer: Not aware of anything else.
Submitted: 10 months ago.
Category: Australia Law
Expert:  kmslaw replied 10 months ago.

Hello my name is***** am a solicitor who will help with your inquiry today. I'm sorry you've had to wait for someone to help you for so long now today. I will get onto this as soon as possible and advise you what to do. Give me about 45 minutes and I will see what I can do for you.

Expert:  kmslaw replied 10 months ago.

Hello again and thanks for your patience. It would be well worth your while to consider whether you have a board meeting shortly before you go to market so you can talk about reserving a particular portion of the income that comes in in order to invest for the company or run the company - this will make it clear that anything you receive over a particular amount within a certain time would likely be kept for declaring dividends, so then there can be no argument from the third director that all the money that comes in should be the subject of a declaration for a dividend. So that way, if you still wish to have the director assist the company right now but you want to limit their right to be paid anything if you intend to vote them out of the organisation, you can direct him or her back to the resolution you achieve in the board meeting as to what profits are available for distribution by dividend. Does that make sense? So what you are doing is preparing yourself for his removal. Also try to ascertain whether you have each got the same class of share - if he has a different class of share to the other two directors, you can make a resolution before you go to market that only certain shares may receive a dividend on the profits achieved at a certain date, and that another board meeting will be held to declare that his type of share will receive a dividend. Be careful also about whether your Constitution requires that kind of decision to be put to a general meeting first before directors and also whether a special resolution or ordinary resolution is required to do it. So the short answer to your question is yes you should seek to remove the director now if you are worried about how much money they will be entitled to, but there are other things you can do now also to protect the money that is achieved from going to market. Best of luck, I hope that helps you.