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Leon, Solicitor
Category: Australia Law
Satisfied Customers: 44179
Experience:  BEc Dip Ed, Dip Law (SAB) MTax (UNSW)
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I have a question regarding commercial law, directors

Customer Question

Hi, I have a question regarding commercial law, directors disputes and breach of unit holders agreements.
JA: What state are you in? It matters because laws vary by location.
Customer: In WA
JA: Has anything been filed or reported?
Customer: No, we have been to mediation with the other partners to resolve the issues. But no official documents have been filed.
JA: Anything else you want the lawyer to know before I connect you?
Customer: Can you advise approximate cost?
Submitted: 9 months ago.
Category: Australia Law
Expert:  Leon replied 9 months ago.

Good Morning.

My name is ***** ***** I am a NSW Solicitor. Thank you for your question, and will do my best to assist you with your question. Please understand this is not legal advise but a guide to assist you.

What is the question?

Customer: replied 9 months ago.
Good morning, so our problem is directors dispute and breach of unitholders agreement. There are four directors and three shareholders holding equal shares. All directors work in the company and get paid wages for their hours worked in the businesses. The business relationship is strained from previous issues and we have been to mediation to get them resolved. There is unfair treatment and decisions being pushed through by two shareholders that we would think need unanimous agreement on and not just majority. The business cannot be sold as there are no buyers (we have tried) and partners cannot be bought out due to lack of funds. How can a toxic business relationship be resolved? The current issue is that hours are note getting paid because they are deemed not necessary by two of the partners. Who can resolve this issue? We have called a breach and sent notice to the other partners to get this rectified and to attend mediation. They think there is not case and refuse mediation. How should we proceed from here, what are our options?
Expert:  Leon replied 9 months ago.

Good Morning,

What is the breach that you refer to?

Has the breach caused any losses to the business and the other unit holders?

You mention you have been to mediation, have the parties agreed that there is an issue and to work towards rectifying it?

Customer: replied 9 months ago.
We believe the breach is 'execution of contracts between the company and any security holder or its related body corporate'. Breach has not caused loss to business, but loss to partner as the hours are not getting paid. The previous issues are still being brought up and have not been resolved. However with these new additional issues arising there is need for mediation again. But partners refuse to see the new situation as breach and will not commit to attend mediation
Expert:  Leon replied 9 months ago.

You have to be able to show the part f the agreement they have breached. It is not enough to believe they have.

A director has a right to run the company and they make the decisions. The other unit holders do not have the same powers.

If they have acted in a way that is prejudicial to the company then they may have breached their duties as directors as well as the agreement.

If a partner is not being paid it is an employment issue and has to look at his contract to claim his unpaid wages.

I think you need to get all the information together and have a solicitor look at the agreement and what the issues are and set out what you think the breaches are and then get more detailed advise.

It is more than simply a breach of the unit holders agreement.

Who set up the company and the agreement?

Customer: replied 9 months ago.
Unfortunately there are not contracts for partners working in the business. All directors are also shareholders and hold the same powers. No CEO has been appointed. The two partners in question claim that wage / payment decisions for the directors/shareholders only need simple majority by two the director/shareholders as it falls under operational management. Which I think is fair when staff is employed but not for working directors/shareholders as it affects the directors/shareholders directly. Can I push for mediation even if there is no breach?
A law firm set up the agreement and an accountant set up the the company and the trust. I will try and get the directors/shareholders to agree to a change of the unitholders agreement to make sure this does not happen again in the future. Would you recommend unanimous majority for all decisions?
Expert:  Leon replied 9 months ago.

Good Morning.

If there is no agreement in writing then there is a verbal agreement as employees,

If there is no breach you cannot seek a mediation because there is nothing to resolve.

If the agreement is to be changed you would need a 75% majority of the shareholders.

You need to see the solicitor that drafted it as they would have knowledge of what was intended and how the agreement was drafted.

If they cannot shed some light then they would need to look at the Corporation Act.

I hope this makes sense and is of assistance. If there is nothing further

thank you for using my services.

If I have missed anything, or you have any further questions please let me know

If there is anything else in the future please do not hesitate to ask.

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