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directors appointment

Re: directors appointment

Postby dls » Wed Oct 05, 2016 7:21 am

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Re: directors appointment

Postby jantra » Wed Oct 05, 2016 5:14 pm

what I have found out today:

1. the SHA has a clause which states in the event of any conflict with the articles, the SHA takes precedence
2. where a shareholder is in breach, they have X days to remedy the breach or they will have issued a default transfer notice of their shares
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Re: directors appointment

Postby atticus » Wed Oct 05, 2016 6:03 pm

I assume that your client is (a) a minority shareholder and (b) not the one in breach.

Is he or she in a position to insist that a deemed transfer notice has been given? Can he or she buy out the offending parties? Would he or she want to?
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Re: directors appointment

Postby jantra » Wed Oct 05, 2016 6:11 pm

its more complicated. there are 23 shareholders in total, 6 of which control 44% and voted against the appointment of the director.

the director in question owns 7% of shares.

the 44% have engaged a law firm to deal with the company solicitors
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Re: directors appointment

Postby dls » Wed Oct 05, 2016 6:50 pm

The clause about the precedence of the SHA must be read with severe caution.

The Articles govern the relationship of the company with the outside world. The outside world is entitled - entirely - to assume they will be applied. In oarticular an outsider must be able to identify directors from Companies House, and to be able to act upon that information. This is a fundamental of company law.

The clause within the SHA can _only_ apply to regulate the actions of shareholders when voting. If it purported to impose such a restriction so as to attempt to invalidate the actions of the company, I would need convincing that it was effective.
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Re: directors appointment

Postby jantra » Wed Oct 05, 2016 7:19 pm

can you clarify what actions you refer to in your last sentence?

no one is suggesting the actions of the company should be invalidated as any third party would believe they were dealing with a director, what is being stated is that the appointment is invalid as it did not comply with the SHA
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Re: directors appointment

Postby dls » Wed Oct 05, 2016 7:29 pm

Companies House says he is a director. Therefore he is.

Breach of a private shareholders' agreement gives rise to an action as between shareholders. I do not see in any way how it could invalidate the appointment of a director.
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Re: directors appointment

Postby jantra » Wed Oct 05, 2016 7:34 pm

the company and shareholders are bound by the terms set out in the SHA. part of that is not to appoint another director without shareholder consent. that consent has not been given.

therefore the appointment creates a breach which requires remedy. surely the logical remedy is the removal of the director
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Re: directors appointment

Postby dls » Wed Oct 05, 2016 7:45 pm

His appointment is valid until decisions are taken in accordance with the company procedures, to remove him.

The company itself takes no part in deciding who will be its directors or who will not be. The company does not vote; it acts (in this instance) in accordance with the votes of shareholders or others with powers given.

This is a dead end.
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Re: directors appointment

Postby jantra » Wed Oct 05, 2016 7:51 pm

in the general meeting a vote to appoint the director was taken in secret with 44% stating they voted against the appointment after the event.

the company solicitors said that the appointment was passed even though it didnt reach the 90% hurdle rate because they weren't aware of the requirement of the SHA and the need for shareholder consent.

yet you say this is a dead end. why? thw company or its shareholders havent abided by the terms. can contracts be broken so easily with no remedy?
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