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Breach of fiduciary duty?

If a fellow director threatens the company with solicitors, is it a breach of fiduciary duty?

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Our company is tiny - it was formed to purchase the freehold to the land that a row of six houses was built on. Each house owner is a director and I am chairman.

One of the directors/owners is threatening to bring in solicitors to determine responsibility/liability for a piece of land that the previous owner of the property 'grabbed' for his garden. We agreed to let them use the land until they sold, but now they expect us to pay to maintain it, plus a wall that was built on it without our permission.

My question really: is threatening your own company with legal action a breach of fiduciary duty for a director?

Replies (7)

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By paul.benny
17th Dec 2020 16:51

That's a legal question, this is an accountant's forum and I'm not a lawyer.

With those caveats, my thoughts are
- the fiducary duty of directors (to act in the best interests of the company) is collective rather than individual.
- why should legal action to resolve a dispute be in breach of any duty?
- what is about merely indicating the possibility action that you consider might be in breach of any duty?

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By lionofludesch
17th Dec 2020 17:00

To be honest, you need this resolving.

If that involves solicitors, so be it.

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By bernard michael
17th Dec 2020 17:23

In one sense he is acting against himself and couldn't be involved in any arbitration to settle this. He should resign before litigating unless there is some caveat in the property deeds that states each owner shall be a director. This little bit of advice is pro bono. You now should talk to a solicitor and pay a fee

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By Cheshire
17th Dec 2020 17:31

Is he really threatening the company or is it just complete frustration at what sounds like something that is clearly fast becoming a duff decision/inertia at dealing with this properly in the first instance.

Not an accounting question so unsure why you would join a forum for Accountants to ask such a question.

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By Paul Crowley
17th Dec 2020 20:12

Your rules say all members entitled to become directors at own request
Company is not trading, just sharing joint costs
The directors permitted an inappropriate action
You do not say who is aggrieved? Not by name but what action they want undertaken
My recommendation would be to get solved the problem, not try to threaten your neighbour with some tomfoolery that could be unenforceable but solidify the dispute.
Company law disputes are exceedingly expensive and will require exceedingly high Service charges to be made over what is probably a financially trivial matter
No one will win as costs get taxed by the courts (no one gets away without contributing to legal costs

Perhaps time to get a property manager involved, they deal with this nonsense all the time. But you will need to get officers indemnity insurance before they would even look to discuss the issue

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By Tax Dragon
17th Dec 2020 20:29

How is asking a solicitor to advise on the legal position a "threat"?* Like the others say, I don't think countering with a bunch of (unpaid) accountants will make anyone quake in their boots.

* .oO And how come the ownership of, and responsibility for, the grabbed land wasn't established before the new incumbent took, or didn't take, possession?

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Replying to Tax Dragon:
By Paul Crowley
18th Dec 2020 18:00

And that is why DIY is rubbish
Existing directors permitted buyer to expect to buy what he saw.
Shame on them and cheapest resoloution is to accept buyer bought what was seen
What is the grand design for the use of the grabbed land?
Or is it just a matter of incredibly expensive principle?
Or are the other five annoyed that it is too late to grab use of land owned by the company.

We are of course as usual talking to ourselves

Because no body here is sufficiently outraged that the new member expects to defend his position

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