Company Law: Directors vs Shareholders
Asked Jan 21, 2009, 11:24 PM
My situation may be rare but I am going to put it to you:
A company with 3 directors (1 is a managing director and the husband of a director); the other 2 directors are the son and wife/mother.
There is a breakdown in the relationship between husband and wife; she starts taking cash from the company till every day or weekly for a 2 year period without the authorization of $100,000.00. She receives memo's from the MD to stop taking cash from the cash machine but tears up the memo and throws it back in the face of the MD claiming the company is hers.
She refuses to look at the yearly audited accounts or understand the situation within the company in that the audited accounts show 3 yrs of losses and a possible situation of insolvency if no urgent steps are taken to correct high overheads and increased sales.
The son, deciding that he must take urgent steps to rectify the situation initiates:
1) Major cost cutting across the board, including suspension of a salary increment as a director, cutting the monthly allowance to the mother from $8,000 down to $3500 per month as that is the director's allowance/salary he receives. And the managing director reduces his monthly director's salary from $6000 down to $3000 to help the company turn around its business situation
2) Increase purchasing of products to sell and improving the range of products by asking suppliers for longer credit terms and better discount margins for bigger volume purchasing
3) Requested the mother to stop taking cash from the till and to stop claiming for credit card expenses. She tells him to go to hell and continues her ways.
As a director in a company, the son feels he is obligated under company law to ensure the company is run ethically and that means ensuring it can meet all loans to the bank on time and ensuring the company returns back to the black as soon as possible.
The son then realizes the only way for the company to continue to improve and return back to the black and to stop the constant inter-office conflict between husband and wife (who are bringing their personal issues to the office and clearly creating an unhealthy working environment for everyone) is to sack the mother as a director though she remains a minority shareholder
She refuses to stop coming to the office and creates mayhem in the office by bullying the staff, using staff for menial jobs that are beyond their job scopes and still creating an uncomfortable working environment for the directors and staff.
DO the directors (existing) have a right to:
1) seek a court injunction barring her from entering the premsis in that she creates a hostile working environment and cannot co-operate or work with the MD and director of the company?
2) file a law suit or claim in court to recover the 100k of cash she has taken without authorization (criminal breach of trust?)
3) If the value of the shares are worth less than the 100k she owes the company and now that she owes the company, can the amount owed be contra against the shares she owns and shares distributed between the remaining 2 directors as a settlement?
I wanted to get your feedbck on this unusual situation...