Company failed to pay dividend to minority

Company has failed to pay dividends to a minority shareholder for last three years

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First, I appreciate this is drifting into legal territory, but never have I known this forum not to at least have a go at most of these sort of things:

Background is provided on my earlier thread:
https://www.accountingweb.co.uk/any-answers/accountant-have-to-provide-a...

So moving on. It looks like A is going to do a Spongebob with his company and cut B out completely. Leaving aside all the remedies regarding transfer of value and minority shareholder protection, I'd like to concentrate on the dividends issue.

As mentioned in a comment, for the last few years the company has been declaring a dividend and solely A has been taking it. For simplicity sake, we'll say its £4,000k a year for maybe three years.

Now the way I look at it is, there are only two options:

A. The £4k should be grossed up to £5,333 per year. The accounts filed are wrong, and the COMPANY owes £4k to shareholder B.
B. The accounts filed are right, the dividends are only £4k per year but A has wrongly (illegally probably) taken them all. A owes B £3k.

The difference of interpretation is clear, but which is right? The simple reason I ask is that the Company is going down the pan. It doesn't have 40 pence to rub together, let alone £4k. B taking action against the company is pointless.

A, on the other hand is a real person, with a real house and car and the like. A is NOT bankrupt. B suing A, or even going to the police about A, is likely to yield a payoff that will never come if B sues the company.

Again, appreciate this is very much heading into legal territory but does anyone know the answer? Or is it simply 'hope for a friendly judge on the day, and sue A' approach?

Replies (6)

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By zebaa
03rd Jan 2019 14:03

B may have been cheated but doing anything other than grit their teeth is likely to cost them both time & money with little chance of return. Sorry.

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
03rd Jan 2019 16:34

I haven't read your earlier post so apologies if repeating something here.

Probably little or no point in going after the Company (although shareholder B could object to the dissolution procedure to stall the position) Shareholder B could also threaten to Liquidate but the Director/Shareholder might thank them for it...

I do wonder if the Shareholder B can legally pursue Shareholder A on basis A took money owed to B and keep the Company out of it.

Probably needs a specialist insolvency solicitor to advise. I can recommend one if no luck on the forum.

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ALISK
By atleastisoundknowledgable...
03rd Jan 2019 18:14

For my two-penniesworth, I’d say that the company is at fault for not issuing the dividends correctly. B therefore can’t sue A.

The Companies Act may have some penalty against A as the director, but you’d need to look into that.

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By Manchester_man
04th Jan 2019 00:07

I agree with the esteemed ALISK above. Were dividend vouchers created, or not? If not, then technically the 'dividends' were loans and could technically be pursued by the IP. In reality, however, B will end up having learned a lesson and the company will turn to ashes.

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Replying to Manchester_man:
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By thevaliant
04th Jan 2019 00:15

I doubt anything has been done correctly these last few years. Did wonder about the vouchers (they won't exist), but you'd need a VERY friendly IP clearly on your side to pursue the payments and have them returned to the 'company' before distributions where then made.

Thanks all for answering.

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Replying to thevaliant:
ALISK
By atleastisoundknowledgable...
04th Jan 2019 07:08

Well A will be appointing the IP, so nil chance of that happening.

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