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directors appointment

directors appointment

Postby jantra » Mon Oct 03, 2016 9:24 pm

Swarbians

If the SHA states that no one can be appointed or removed from the board without shareholder consent, and that consent is set at 90%, what remedy can a shareholder have if the director was appointed with less than 90%?

Can the individual be removed?
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Re: directors appointment

Postby dls » Tue Oct 04, 2016 5:21 am

The shareholders agreement regulates arrangements between shareholders only and as shareholders. It cannot therefore directly invalidate an appointment of a director which was carried out in accordance with the articles.

A breach of the shareholders' agreement gives rise to an action between shareholders for breach of contract.

Also possible is an action for unfair prejudice.
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Re: directors appointment

Postby jantra » Tue Oct 04, 2016 5:47 am

does this mean that the director can never be removed or would that be one of the remedies available?
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Re: directors appointment

Postby atticus » Tue Oct 04, 2016 5:50 am

A director can be removed; and this may be a remedy.
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Re: directors appointment

Postby jantra » Tue Oct 04, 2016 6:00 am

a couple of other points:

does it matter than the director is also a shareholder and that same law firm that drafted the SHA also drafted the resolutions and administered the general meeting?
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Re: directors appointment

Postby atticus » Tue Oct 04, 2016 7:11 am

He obviously controls the company.

An aggrieved shareholder may have remedies for breach of contract (the shareholders agreement) and/or under s994 Companies Act 2006.
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Re: directors appointment

Postby jantra » Tue Oct 04, 2016 7:30 am

you are correct in that he controls the company, and that is prejudicial to the shareholders.

if the minutes of the GM are issued and it states the percentage of the vote, say 60%, and that the resolution is not passed to appoint as director, and the director is therefore removed at Companies House, could this be challenged?
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Re: directors appointment

Postby atticus » Tue Oct 04, 2016 7:58 am

Possibly. See above.
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Re: directors appointment

Postby dls » Tue Oct 04, 2016 8:15 am

if the minutes of the GM are issued and it states the percentage of the vote, say 60%, and that the resolution is not passed to appoint as director, and the director is therefore removed at Companies House, could this be challenged?


It is not quite clear what you are saying now.

At first you were talking about a breach of the shareholders' agreement. You have moved to a breach of the Articles.
The articles say how a director is appointed. If the appointment is valid under the articles, then it is a valid appointment in company law. That it may be in breach of the shareholders' agreement is of no consequence.

In any event, I doubt that Companies House would be interested. A director's appointment is registered by a form completed and submitted by the company secretary and signed by the appointee.
Companies House will rely on the certificate that he has been validly appointed. Someone aggrieved by the appointment would have first to challenge it at a meeting of the company, and then at court.
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Re: directors appointment

Postby jantra » Tue Oct 04, 2016 8:16 am

Atticus/DLS

Thanks for the heads up. Having sought legal opinion we issue the general meeting minutes which show the vote of 60% and contact Companies House to remove the director, subject to another GM which needs to ratify his appointment according to the terms of the SHA.

There is a clause is the SHA that says the company will not undertake any act that requires shareholder consent. If I am correct does that mean the company is also liable under the terms of the SHA if it fails to adhere to it?
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