Share this content
0
819

Difficult director am I acting correctly?

New-ish director doesn't understand the role and queries everything. Now being slightly threatening

Didn't find your answer?

Search AccountingWEB

We act for a limited company and the two original directors/shareholders.  Back in March 2018, they had a serious cashflow problem and an old friend of one of the directors loaned the business £50,000 and became a director and shareholder with each owning a third of the shares.  A simple agreement was written up stating either party could give 6 months notice for the repayment of the loan.  

Over 2018, the relationship between the original directors and the new director became strained resulting in the new director requesting his £50,000 be repaid in six months time.  He initially offered for the loan to be put on repayment terms provided the other two directors gave personal guarantees.  They are refusing as it was a loan to the company and don't want to take the risk.  The credit rating for the two original directors is poor and they can't obtain funding from elsewhere.

The new director, to put it bluntly, isn't the sharpest tool in the toolbox.  He has trouble understanding anything financial and his emails are barely understandable.  He has asked for payslips for the £400 he was drawing weekly from the business during the summer and couldn't understand that he was being paid a monthly salary of £702.  I went into detail regarding director current accounts, dividends etc.  He has taken legal advice regarding the situation with the other two directors which verifies all advice we have given but he is now being aggressive in his emails.  He is making accusations that my practice is 'ripping him off' from £50K and I won't like his reaction.  I have informed him that due to his aggressive attitude he is not welcome at our offices.  He implies as he is a director of the company he will come when he wants.  

He isn't engaged as a client individually and my initial thoughts are to contact his solicitor and inform him that we do not act for him.

 Any thoughts?

Replies

Please login or register to join the discussion.

By mrme89
21st Jan 2019 11:49

You act for the company. You shouldn't be getting involved in this dispute at all. It's for the directors to resolve between themselves.

If you have made it clear that he is not welcome at your office and he still turns up, you need to call the police for breaching the peace / harassment.

Thanks (1)
avatar
21st Jan 2019 11:56

Tricky - as a shareholder he is entitled to information about the Company. I would set out your position in writing to him regarding his allegations of you "ripping him off" and his threatening you and copy it to his solicitors.

I would be seriously considering resigning as the accountant for the company. Is there realistically any chance of the company repaying the £50k, getting their shares back and him resigning as a Director? The other directors are right about not guaranteeing the money personally if it wasn't done on those terms initially.

I would also worry about were he got his £50k from if he isn't good financially and especially since he has made threats against you personally. Are you sure he wasn't laundering dirty money through the loan to the Company? Did you check were the cash came from when the loan was made?

Thanks (0)
to lesley.barnes
21st Jan 2019 12:34

lesley.barnes wrote:

I would also worry about were he got his £50k from if he isn't good financially and especially since he has made threats against you personally. Are you sure he wasn't laundering dirty money through the loan to the Company? Did you check were the cash came from when the loan was made?

I could give you a very long list of people who earn enough to invest £50,000 in a company but who are not good with money and are not money launderers, as I'm sure could most other accountants who deal with them regularly.

Thanks (0)
avatar
to Duggimon
21st Jan 2019 13:16

So could I but it is one of the questions you have to ask when large sums of money are invested especially in what is a risky venture.

Thanks (0)
avatar
By iknell
to lesley.barnes
21st Jan 2019 14:16

Point 1. Did this over the weekend. I doubt if I get a response, he calls them his solicitors but I get the impression that he has only met them once or twice to put a letter together to the other directors which I was copied into.
Point 2. Agreed. The latest I heard is that the other two directors have offered in writing to repay the £50,000 over 3 years with no personal guarantees. If this is rejected I don't think they will have any option but to go into administration, then the fun will really start.
Point 3. The money came from a 6 figure medical insurance claim so no problem with money laundering.

Thanks (0)
21st Jan 2019 15:04

Classy client!

I think you need to keep it all as simple as possible. No point blinding him with science. Or law. Or accounting. Think "how can I explain this to an 8 year old?" Don't use words not found in a "biff and kipper" book.

Lots of people genuinely go through life with their fists and aggression as the first port of call to get people to back down and do their bidding. I grew up around a bunch of families who lived like that, and think 'Enders is a bit posh and doesn't have enough batterings in it or shouting to be realistic.

State you only add up the numbers, you didn't make the deal. Its nothing to do with you.

State that if he is aggressive to you or your staff, all he will get is a ride to the police station [people like this are always on probation anyhow] What it wont do is get his £50k back.

They will soon go and rage at someone else.

Thanks (0)
avatar
By iknell
to ireallyshouldknowthisbut
21st Jan 2019 14:20

Done the 'Biff and Kipper' explanation to no avail, maybe I need to go 'Janet and John'.
With regards the deal, I actually helped him. I ensured that he was made a director and shareholder and recommended the 6 months notice for repayment to protect him. I also informed him that on all decisions the other two can outvote him making him little more than a 'sleeping partner' but he still signed and paid the money over.

Thanks (0)
avatar
to iknell
21st Jan 2019 15:09

iknell wrote:

With regards the deal, I actually helped him. I ensured that he was made a director and shareholder and recommended the 6 months notice for repayment to protect him.

So you did act for him?

I am worried about this because you were officially acting for the company, so how you could represent yourself as an independent advisor to him, I don't know? It sounds like a conflict of interests and I can understand if he feels that you might be part of conspiracy, even the architect of it.

I think remind him, as you probably have, that all business must be conducted in a mutually respectful manner. You might even ask him if he thinks you should resign and if he does, perhaps you should.

Thanks (1)
avatar
By iknell
to andy.partridge
21st Jan 2019 15:49

The directors of the company brought him to a meeting regarding the potential investment and I stated to all three that he should not just lend the money but ask for more. It was mutually agreed regarding directorship and shareholding.

Thanks (0)
avatar
to iknell
21st Jan 2019 16:04

You need to be clear. You said you helped 'him'. Your duty was solely to the company. How were your ideas beneficial to the company? I'm confused.

Thanks (0)
avatar
to iknell
23rd Jan 2019 18:54

Two points
1] Is the registered office of the company at your offices-if so as a Director he can reasonably claim the right to visit.

2] Do you have a contemporary note of the meeting when you gave advice in connection with his loan, making clear that he was not your client?

Thanks (0)
21st Jan 2019 14:25

The aggressive director may not be your personal client but he is a director of the company and you have to deal with the board.

Quite honestly I always see aggressive behaviour as a red card. Just resign. Then you can spend your valuable time dealing with other clients. Otherwise this is going to be a distraction and no doubt mental stress.

Thanks (2)
By DJKL
to Red Leader
23rd Jan 2019 19:24

Agreed, it is very unlikely things will get better and very likely things will get worse.

Write to the board stating that in light of the general suspicion and animosity amongst the shareholders/ directors , and given no resolution is in sight,you consider you firm should possibly resign from its appointment to the Company.

However if the tenor of the relationship was to improve, and the shareholders/directors could fashion an amicable agreement it might be possible for your firm to give continuity to the Company at this difficult time and continue to act for the Company.

Ball then in their court, they accept resignation or do not accept, their call.

Thanks (0)
Share this content