Breach of s423 CA 2006 - director never sends annual accounts

Breach of s423 CA 2006 - director never sends...

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My client is a shareholder with 5% of the issued share capital in a private English company. The sole director (who has a string of insolvent companies behind her), despite repeated written requests over 5 years, has never sent him a copy of the annual accounts.  The director is in breach of S 423 Companies Act 2006, but what is the potential sanction for persistent failure?

The accounts should disclose all sorts of transactions with related parties etc and with herself and once I have the accounts I will be able to see how far short of Companies Acts Disclosure requirements they are and what is going on.  

It is clearly indicative of failing in her duties as director and eventually there might be an unfair prejudice action, but I cannot find the penalty, fine or whatever the Registrar of Companies can impose for persistent breach over 5 years?

Section 423 says she must provide the accounts, but so what if she does not?

My present planned approach is

  1. Complaint to the Registrar of Companies
  2. Give notice to convene an annual general meeting to receive and approve the annual accounts for 2011,2012,2013,2014,2015
  3. Give notice to director that the refusal to send the annual accounts constitutes severe breach of her fiduciary duties and constitutes significant prejudice to the interests   of a minority shareholder.

Anything else I can / should do?

Replies (3)

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By WhichTyler
23rd Apr 2016 14:00

Get them from companies house?
They are free nowadays. If they haven't filed them for 5 years, then companie house fine the company or its directors.

PS shareholders don't approve the accounts, directors do.

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By johngroganjga
23rd Apr 2016 17:05

Yes but the filed accounts are probably abbreviated.

But back to the OP's points:

1 No point complaining to the the Registrar - this is nothing to do with him.
2 I don't think a 5% shareholder can convene a meeting, but that's a legal point.
3 Yes a strongly worded letter is the way to go - perhaps get a solicitor to write it, or at least ask one what consequences to threaten if accounts are not forthcoming.

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By thevaliant
23rd Apr 2016 20:52

To add to John's answers:

1. Don't bother complaining to Companies House, this is a complete waste of time.
2. I believe the shareholders of 5% can now call for a general meeting. However, I would pretty much guarantee a meeting would not be held, which simply means the director is in breach of another Section of the Companies Act.
3. I would agree with John. You need a solicitor specialised in this sort of law. It is far too easy to ignore Companies Act requirements and have no penalties be imposed.

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