Company - Directors conflict of interest

[light186282]

Hi all,
I am 50% owner of a small software company. Last year my partner decided to set up his own consulting company and invoice his time to our joint company via the consulting company. All the contracts are with the company we jointly own, but my partner invoices from his consulting company. My partner's wife is the book keeper and company secretary & the books done by her. They have taken out significantly more money than they should have last year (something I have discovered recently). Needless to say we have fallen out and legal letters exchanged. My partner has now threatened to wind our company up, since his consultancy company is a creditor - but at the same time he has made me a derisory offer for my shares to buy me out.
Our costs are �5k/month & we have contractual income of �11k/month & have no debts at all.
1/
Surely he is not acting in the best interests of our joint company ?
2/
can a 50% director wind up a company without the support of the other 50% director
3/
We have now shareholder agreement in place, (we always knew we should have) so what's the default position of law

I look forward to the responses.

A

[Androcles]

To be honest, if you have exchanged legal letters already, it might be best to find out what your lawyer recommends in these circumstances.

However, there are a number of things which strike me as odd about this arrangement. What was the agreement you had on drawings from the business? Did you have an agreement about working for third parties (i.e. his consultancy company). Surely he has to have your agreement to invoice his hours in this way?

Do you have an auditor who you could call to look at the financial affairs of the company, since it would appear his wife has a conflict of interests?

[Androcles]

Sorry My answer "escaped" before I made my other point. If he is invoicing the joint business, who signed off the invoice as OK to pay - if if you didn't how come he apparently took out more money than he was entitled? Very suspicious!

[Skyline D]

In itself there's nothing inherently wrong with him invoicing from another company instead of taking a salary. It may well be tax advantageous to him to do so.

As regards the direct questions:
1 - A matter of opinion, he'll say he is.
2 - Yes, I'd think so. The problem is that neither of you can force the other, or the company, to do anything. Inevitably that leaves you hopelessly deadlocked when the relationship breaks down. You clearly have a lawyer so talk to him or her but I would have thought eventually if it came down legal process a judge would order the dissolution of the company if it is so hamstrung as to be unable to operate. Far better to agree a compromise before spending fortunes each on legal bills though.
3 - Pretty much as I said above. Depends what the present position actually is. If either director can sign cheques and he's done nothing fraudulent in paying himself cash (either accounted for it properly to a loan account or paid it correctly to supplier companies or as salary) then I doubt you can do much about it. Equally he couldn't if you took the same provided you have bank access also. Neither of you can actually vote the other off the board nor force the company to do anything in particular legally so it's pretty hamstrung.