Two directors of Company A have fallen out with each other. I am the external accountant for company A.
Company A is small, about 50k turnover. Both directors have approached me (independantly) to ask for advice/moan about the other. I wasn't involved in setting up the company and there is no director/shareholder agreement. I've advised them that it's a matter to sort out between themselves or seek legal advice.
One director wants to talk to me about setting up a seperate company (by himself). He's the main one running the business with all the contacts (which is the source of the problem). He wants me to be the accountant of this new company and Company A would just fade away as the other director hasn't the capability to drive it forward (in his opinion - which I suspect is right). I also suspect he will at some point start to pinch the current clients from Company A as he's the main contact for them at Company A.
Ethically, I don't feel good about this, but I suspect he could grow the business and become a decent sized client.
Shouid I say it's unethical and I can't act for him or should I just be off the opinion "it's a dog eat dog kind of world"???
Replies (6)
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You have an independence issue. You can't (shouldn't) act for both under the circumstances.
You should bin one off.
Let the lawyers sort it out. Once they'e done that, there should be no bar to you acting for both companies.
You could resign as Company A's accountant as soon as the proactive director sets up Company B, then he can appoint you to deal with that without any conflict occurring.
You are only stuffed if they resolve their issues and continue with Company A together.
This position is covered in this article loaded yesterday. See para headed Conflicts of Interest which states:
".... Both you and your clients may feel that you will be able to cope, but as anyone who has dealt with such a situation will tell you it is fraught with difficulties. It might be better to sever ties with one so as not to lose both. The sale of a business or dissolution of a partnership may also pose similar conflicts."
As mrme89 says you shouldnt act for both.
If director A ends up running company A, and director B company B, there should be nothing to prevent you from acting for both - but only once the lawyers have sorted out the divorce.