Shareholder excluded from dividends

Shareholder left company and has not been given share of dividends - or accounts

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I have a client who retained his 20% shareholding after leaving a company.

The Directors have continued to pay dividends to the remaining shareholders 'for tax purposes' (ie instead of salaries) and have refused to provide details of dividends paid or even copies of annual accounts.

Solicitors are struggling to grasp the dividends issue properly so I wondered if anyone is aware of any useful 'Case Law' to quote - please.  Or other suggestions?

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By Matrix
29th Jan 2019 20:19

They should check the articles of association. Your client may need to change solicitor.

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
30th Jan 2019 11:50

Maybe it's time for the client to get better Solicitors...

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By fawltybasil2575
30th Jan 2019 13:11

@ Hanleymail (OP).

Yours is one of those questions to which I want to ask around 20 questions (such comment implies no criticism of your question) and if you could flesh out your question with facts and figures, this could help. Included therein would be how your client acquired the shares, and how and why your client continues to hold the shares after his employment ceased.

Your words “have refused to provide details of dividends paid or even copies of annual accounts“ probably imply that the client has held the shares, from his former employment, for at least a couple of years after the employment terminated.

Frankly, if the amounts at issue are material (and I suspect that they are) then an hour’s pre-arranged appointment with a company lawyer, who has experience of company disputes, is essential. Whilst the dividend aspect itself may well be important, the much bigger picture of the value of the shares may be substantially more important.

I would NOT, in your position, give your client “advice” on his shareholder rights (since your governing body, and/or the Courts, could state that you were providing advice outsider your professional field) but would strongly advise that your client obtain such advice from a company lawyer.

You will nonetheless no doubt wish to gain a “flavour” of the client’s position, and you could do much worse than studying the Companies Act 2006; and also reading the very many internet articles on “Shareholders’ Rights”.

The company's failure to supply copies of the full Annual Accounts, to which shareholders are entitled, is one clear breach of the legislation (as you will know, the Companies House website will enable you and your client to see the Accounts filed there, albeit the content thereof being very probably more limited) so there is certainly some action to be taken: the nature of such action can only be decided after your client has received the specialist legal advice referred to above.

Basil.

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