Is it possible to get rid of a proprietary director?

R

room305

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Hi,

A proprietary director who owns a quarter stake in a business I own majority shareholding in is proving a liability. I want him gone but he's not amenable to any kind of reasonable buy-out offer.

Having invested heavily in the brand and advertising of this company, which is now starting to bear fruit, I am extremely reluctant to wrap it up and start again.

Has anyone any ideas for what I can do?
 
You should check your Articles, which should deal with removing a director. If there is no other solution, the shareholders can usually vote a director off by simple majority. Also see Companies Act 1963, s182.

Sprite
 
Bear in mind that voting off a director is one matter. His shareholding is another matter entirely.
 
Graham_07 said:
Bear in mind that voting off a director is one matter. His shareholding is another matter entirely.
Click to expand...

Sorry I should have been clearer in this regard. I will be seeking to have him removed as a director but in a small company a sizeable shareholder has quasi-directorship rights anyway (or so I understand).

Is there any way to get shut of him entirely?
 
If you could get his shareholding down to 20%, you could possibly arrange purchase of the company by another entity and compulsory acquire the 20% shareholding.

Firstly, you need to remove him as a director. Then possibly look for additional investment in the company hopng that he does not participate and thus diluting his shareholding to 20%. Then sell the company into a new shell company at market price.

Obviously you'd need to get a solicitor & accountant to look at how this can be done properly & above board, but it may be the only solution.

Link to article from lk shields on something similar
[broken link removed]
 
mcaul said:
If you could get his shareholding down to 20%, you could possibly arrange purchase of the company by another entity and compulsory acquire the 20% shareholding.

Firstly, you need to remove him as a director. Then possibly look for additional investment in the company hopng that he does not participate and thus diluting his shareholding to 20%. Then sell the company into a new shell company at market price.

Obviously you'd need to get a solicitor & accountant to look at how this can be done properly & above board, but it may be the only solution.

Link to article from lk shields on something similar
[broken link removed]
Click to expand...

Thank you mcaul, this is an area very much worthy of investigation. Removing him as a director I don't believe is an issue and knowing him I doubt he'd be interested in further investment so dilution of his shareholding is easily possible.

With all the usual caveats of talking to my solicitor first, this provides hope. Thank you kindly.
 
Can I just clarify if you are full-time in the business with this guy? I know you own the majority, but it wasn't 100% clear from your original post if you actively involved also? Was he involved from the start, or did he buy in at some stage?
 
Complainer said:
Can I just clarify if you are full-time in the business with this guy? I know you own the majority, but it wasn't 100% clear from your original post if you actively involved also? Was he involved from the start, or did he buy in at some stage?
Click to expand...

I don't work in the business full-time no. Other commitments mean I can only work part-time in the business and largely this is all that's required from me. The proprietary director in question was originally supposed to work full-time in the business but he's proved useless, so I ended up contracting out his share of the work.

However, he was involved from the start and he did provide some financing.
 
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