directors control and tax problems

directors control and tax problems

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Hi I have been approched by a potential new client who is having difficulties with his two co directors.

My client and the two co directors established a limited company 15 months ago,, each director holds equal A class shares and the present company turnover is circ 400K.

Since establishing the company the two other directors have formed a relationship and have forcing my client out of the loop, he is now concerned that the two other directors are misappropiating funds and avoiding tax.

the key issues they are as follows.

  1. My client has had his income reduced whilst the other two are still enjoy large payments
  2. His co directors are refusing to give him access to the company bank account and other financial information
  3. Family members of the two co directors have been recurited for office positions and paid as self employed and no tax and NI being paid
  4. Various contractors are being used which clearly come under IR35 and again no tax or ni is being paid
  5. All 3 directors have established seperate individual limited company's and have been paying money in to these as there drawings and then paying themselves dividends,,, 

My client wants to take back control and ensure that the company operates in an appropiate way... therefore my questions are... how can he regain control and should offer a Voluntary disclosure. 

Replies (5)

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By mrme89
30th Aug 2014 07:08

You say potential client but then go on to say "my client".
If they are not your client, I'd decline the engagement. It'll be more trouble than it's worh - what is thei current accountants take on the scenario?

You also don't mention the shareholdings of each director?

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By johngroganjga
30th Aug 2014 07:35

We are in fact told that shareholdings are equal.

The advice the director who has approached you needs is legal advice. There is nothing an accountant can do to help him. He needs to harness the power of the law.

So the best service you can offer him at this stage is to refer him to a good solicitor experienced in shareholder disputes.

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Replying to Tax Dragon:
By mrme89
30th Aug 2014 07:43

.

johngroganjga wrote:
We are in fact told that shareholdings are equal.

The advice the director who has approached you needs is legal advice. There is nothing an accountant can do to help him. He needs to harness the power of the law.

So the best service you can offer him at this stage is to refer him to a good solicitor experienced in shareholder disputes.

You're right - didn't see the shareholding. It's still early!

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By User deleted
30th Aug 2014 07:35

From what I have understood your (potential) client's situation is as follows:

1. No board control - being one of the three directors - this means the other two call the shots

2. No company control - being a 1/3rd owner - this means the other shareholders can take most of the decisions except where a special resolution is required. They can even remove your client as the director.

Whilst CA/06 does offer some solutions like:

    a) Call for a directors/members meeting and raise the concerns 

    b) Ask for the accounts to be audited

    c) Get a s.994 order etc

none of it is going to be a straightforward solution and your client would be best advised to seek the help of solicitor. Negotiating his way out may be the ideal solution.

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By bernard michael
30th Aug 2014 10:52

Was there a shareholders or directors agreement put in place when they formed the company?Sorry that was a silly question

Check the mem & arts sometimes they can help in dispute cases. However stress to the potential client that he should seek legal advice ASAP as the longer it goes on the worse it can become.Also if ultimately the company goes into liquidation the liquidator will not be impressed with a  "what can I do" attitude. Do something

I agree with the advice of John & Taxguru. Unless you have time to waste or fancy a bit of underpaid fun walk away. Having said that the experience is useful if you haven't handled this type of problem before.

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