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One director refusing to submit accounts

Accounts for limited company overdue and director withholding financial information

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Our accounts are long overdue now. The director with majority shareholding is refusing to submit accounts. They have refused to hand over the financial information for the rest of us to sort the mess. We believe this is either a play to put the company under and cut us out or they have something to hide. Another director and myself are silent partners who between us own 40% of the shareholding. We are completely in the dark as to the business operations. We have got letters to our home addresses now from HMRC. What is our best course of action?

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By Duggimon
27th Feb 2020 12:26

I would suggest checking the company articles and your shareholder agreement to see what options you may have to exert any influence over the company, though if you have a legal dispute with the other director, it's a lawyer you need rather than an accountant.

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By paul.benny
27th Feb 2020 12:29

This looks like a legal question rather than an accounting one.

Before you starting incurring legal fees, a few questions to consider:

Probably most importantly, how much money is at stake? Not just how much did you put in to the company at the start, but how much is the business worth now? It could be a question of protecting yourself from liabilities rather than recovering any value.

When you and the other director invested, did you put in place any kind of shareholder agreement. Without that, your position as minority shareholders is weakened. A combined 40% holding is enough to prevent some actions, though.

Does the company have accountants/auditors? Have you sought their input?

Have you been round to the company's premises, the awkward director's home to see what might be going on? (without necessarily engaging with him/her).

Do you have any mutual friends/contacts who could act as intermediaries to establish what might be happening?

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Replying to paul.benny:
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By Gemmapell
27th Feb 2020 12:46

We have no idea what the company is worth. We dont have any documentation or knowledge of the accountants. No filings as yet. Sorry not well versed in this sort of stuff. We just put up the money. Hard to believe someone can do this.

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Replying to Gemmapell:
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By paul.benny
27th Feb 2020 12:53

How much did you put in? (don't answer that here) If it's £500, you'll spend more in legal fees than you'll recover; if it's £50,000, it's worth trying to get it back - but bear in mind there may be nothing left.

You can check what is recorded at Companies House for free here: https://beta.companieshouse.gov.uk

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Replying to Gemmapell:
By ireallyshouldknowthisbut
27th Feb 2020 16:00

Gemmapell wrote:

We have no idea what the company is worth. We don't have any documentation or knowledge of the accountants. No filings as yet. Sorry not well versed in this sort of stuff. We just put up the money. Hard to believe someone can do this.

It's not that hard to believe someone would put money into a business without being 'well versed in this sort of stuff' as some people are too trusting or plain naive, but they don't tend to do it the second time.

If you think you have been the victim of a fraud, then do report the director. Of course company directors have joint and several liability for any wrongdoing by the company.......................If your name is Gemma Pell, there are no director's listed with that name on Companies House so you might not even be a director, which is probably a good thing.

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By paul.benny
27th Feb 2020 12:29

duplicated post

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RLI
By lionofludesch
27th Feb 2020 12:34

Sadly, you need solicitorsweb.co.uk

Internal company disputes are something I stay out of.

What do the company's accountants say ?

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Replying to lionofludesch:
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By Gemmapell
27th Feb 2020 12:49

We don't know who the accountants are. He is refusing to communicate with us and there has not been a filing to date. We will get on to a solicitor and will let you know what they tell us.

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Replying to Gemmapell:
RLI
By lionofludesch
27th Feb 2020 12:55

Well, thank you. That would be appreciated.

So you've not seen any accounts, then ? How long have you been a director ?

Have you searched Companies House ?

What advice did you take when you invested in this company ?

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By fawltybasil2575
27th Feb 2020 13:09

@ Gemmapell (OP)

I would certainly endorse the comments above.

I would add that you should request a meeting initially with a "COMPANY LAWYER" (ie a solicitor specialising in company law).

Furthermore, such meeting should NOT be with the company's own solicitors (who would have a conflict of interest).

I would also add "urgency of attention".

I suggest you urgently considering the position re monies in the company bank account, in terms of ensuring no improper withdrawals of money by the other director.

Basil.

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By bernard michael
27th Feb 2020 14:23

Just to clarify.
Did you receive the share certificates ?
Were they taken out under an SEIS scheme ?
Surely you took professional advice before investing - from whom
Are you a cheque signatory?
Did you play any part in the management of the company ?
I agree with the others it's is a legal matter but requires immediate attention or you may find the bird has flown

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By SWAccountant
27th Feb 2020 14:40

So you've invested £x into a company without doing any Due Diligence, and now the majority shareholder is being difficult/not handing over financial records?

Sorry to say so, but it sounds like your cash is gone.

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RLI
By lionofludesch
27th Feb 2020 16:06

Consider reporting this to the police as a fraud.

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Replying to lionofludesch:
Flag of the Soviet Union
By thevaliant
28th Feb 2020 12:06

"That's a civil matter sir."

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Flag of the Soviet Union
By thevaliant
28th Feb 2020 10:23

Lots of good advice here, mostly about needing to see a solicitor. However, I would largely agree with the poster suggesting your money is probably gone. From incorporation, you have twenty one months to file. If these accounts are long overdue, then you're probably even further down the line of not getting anything back.

You mention letters from HMRC? Are you sure this isn't Companies House? WHO are the letters addressed to (you or the company) and what do these letters say?

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