Shareholders and the board

Shareholders and the board

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A major shareholder (less than 50% but more than 25% not sure of precise %) is concerend that the board of a small company are not acting in the best interest of the company or its shareholders.

Can this shareholder insist on an independent member of the board to try and keep the company within its investor obligations?

The current board is made up of just 2 directors and seem to be getting carried away and possibly putting EIS investors tax incentives in danger by possibly losing EIS status completely.

The company was marketed to potential investors as an EIS approved one with all the tax advantages that comes with it.
Peter Watkin

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By martinfoley07
08th Oct 2006 23:57

Articles of Association
Peter
The person you refer to must start with the company's Arts of Assocn. What do they say about appointment of directors?

Then he needs to check out if there are any other legally binding agreements other than the Arts - e.g was a shareholder agreement signed? Was an investment memorandum signed? Do they say anything about appointment of directors?

He has to ascertain these basic facts before he can determine anything.

Of course, if things go pear-shaped, it may be possible to take action based on the original marketing being misleading, but the major shareholder should never have got into this position wihtout being quite clear on his original rights when making the investment. They will be set in in one or all of the above documents.

It is extraordinary how many folk go into companies without reading the basic legal documents that govern the company's management. The legal documents will set out what he can and cannot insist on.

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