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Director dispute - opinion required

Husband and wfie messy divorce...

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Im having a day of it but Ive just had a phone call from a client who informed me her and her husband are seperating and that Im not to provide any information, financial or otherwise, to the husband.  The comapny is set up with wife, husband and wifes mother as directors and the husband and wife have 1 share each.

I told the client on the phone that to the best of my knowledge I would need to copy all 3 parties into all correspondance and any changes would need to be approved by a majority of directors where applicable but if anyone could shed any further info on the matter that would be great.  I then recevied an email from her stating that I was not to communicate with anyone except for her and to contact her solicitor (cc'd into email) if I had any queries.

Part of me thinks I should just resign now as its going to be nightmare!

Replies (13)

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By andy.partridge
02nd Oct 2018 17:31

I think you need to try to wrest control.

You could inform your client of your professional and legal obligations and that is how you have to operate. Tell her that if she is not comfortable with that you will, reluctantly, offer your resignation.

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By GW
02nd Oct 2018 17:46

I have a similar situation at present, although because they are not married there is no divorce.

I agree with Andy, I have taken the line I am appointed accountant to the company not the directors and need to avoid a conflict of interest; so I have set out exactly what I will and won't do.

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By ireallyshouldknowthisbut
02nd Oct 2018 18:22

I think you need to make another phone call in the morning...........and explain you act for the company. You don't play favorites to her or the husband, you act for all parties equally. You will act as you see fit and proper, certainly not on her sole instruction, or indeed the sole instruction of her soon to be ex-husband.

I would encourage them to view you as independant, and explain if you "take sides" both sides will need to appoint separate accountants and the time and costs involved will be exorbitant, moreover you will be resigning so it will be 2 new firms.

My normal line is that my job is to maximise the business income available. ie my job is to make the cake as big as possible. Its up to the lawyers to decide how to split the cake. If they spend a lot of time arguing over how big the cake is, the lawyers and accountants will be taking big slices of the cake.

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By Glenn Martin
03rd Oct 2018 12:42

These are very difficult situations to deal with. I had a similar one a few year back.

You have to remain independent and be very careful in what you say/do with either party.

The case I had were tearing each other apart and ruining what was a good business and both sides incurring massive legal costs.

I managed to stop the madness and come up with a practical solution which worked, saved the business and let them move without the big legal costs.

The wife then took the business to another accountants after the dust had settled she somehow thought her half was not as big as the husbands half and I had sided with him, which was totally not the case.

Best advice is tell whoever is at fault to buy some flowers and say sorry.

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Replying to Glennzy:
By Democratus
05th Oct 2018 11:32

Funny how one half can be different from another half.

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Replying to Democratus:
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By andy.partridge
05th Oct 2018 11:56

Precisely half the assets might represent more or less than half of their earning potential.

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Replying to Democratus:
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By Malcolm McFarlin
05th Oct 2018 15:30

my wife tells me 'what is mine is mine and what is yours is mine'.

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By JDBENJAMIN
05th Oct 2018 10:44

I've been in this situation, with a divorcing couple and a 50/50 share split, both being directors. I explained that any information given to me that related to the company would be shared, as both of them were entitled to it as directors, and neither had a majority on the Board that could pass a resolution restricting information being given to the other. I also managed to carry on doing both their personal tax returns while their lawyers ran up about £100,000 in legal fees! I explained that I would not be taking sides, and would act strictly in the company's interests. If that caused a conflict with personal taxation matters, I would cease to work on the latter. It worked perfectly well, in fact. The divorce settlement resulted in the wife setting up her own company with half the assets of the original company, and then getting her own accountant. I still act for the husband.

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By brumsub
05th Oct 2018 11:18

What does your Letter of Engagement say?

We have a standard clause provided by our professional body as follows:

'Internal disputes
If we become aware of a dispute between the parties who own or are in some way involved in the ownership and management of the business, it should be noted that our client is the business and we would not provide information or services to one party without the express knowledge and permission of all parties. Unless otherwise agreed by all parties we will continue to supply information to the company for the attention of the directors. If conflicting advice, information or instructions are received from different individuals e.g. directors in the business, we will refer the matter back to the board of directors and take no further action until the board of directors has agreed the action to be taken.'

Hope that helps.

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By paddy55
06th Oct 2018 07:13

You are accountant to the company. The company's board of directors decides on the actions of the company. I would suggest that you only take instructions from a valid board meeting backed up by minutes of the board meeting or alternatively instructions signed by all board members.

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Tornado
By Tornado
07th Oct 2018 11:14

My father taught me many years ago not to create a 50/50 company if at all possible. 49% to one, 49% to the other and the remaining shares to an independent person such as the Accountant. In case of dispute, the independent shareholder would be required to decide the way a vote goes based on professional advice they have taken and/or their own professional skills.

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By richardterhorst
08th Oct 2018 10:26

You cannot legally withold data from the director when he/she asks for it.

2 directors outvote 1 director. Guess which way the wife's mother will vote.

But as the forum advises, make a phone call and explain the realities to him. Divorces only end up with losers (except for the solicitors) and no doubt one loser will be the accountant as you will be perceived as being biased by both parties.

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By Red Leader
08th Oct 2018 12:11

I don't think it's as simple as acting for the company. You also have a duty to the directors personally as you are also engaged to deal with their personal tax affairs.

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