What Can Be Done If a Director Stops Salary and Dividends?

Question from Fifi, What Can Be Done If a Director Stops Salary and Dividends?

Answer from AI:

Understanding the Role of Directors and PSCs

In the UK, directors have a fiduciary duty to act in the best interests of the company and its shareholders. A Person with Significant Control (PSC) is someone who has significant influence or control over the company, which can be through various means, not just shareholding.

Stopping Salary and Dividends

If your uncle has unilaterally stopped your mother’s salary and dividends without a board meeting or proper discussion, this could be a breach of his fiduciary duties. Directors are required to:

• Act within their powers as outlined in the company’s constitution.
• Promote the success of the company for the benefit of its members.
• Exercise independent judgment.
• Avoid conflicts of interest.
• Not accept benefits from third parties.
• Declare any interest in a proposed transaction or arrangement.

Legal Steps to Address the Issue

1. **Request a Board Meeting**: As directors, you and your mother have the right to request a board meeting to discuss the issues. This can be done formally through a written request.

2. **Review the Company’s Articles of Association**: Check the company’s governing documents to understand the rules around decision-making and the distribution of salaries and dividends.

3. **Seek Mediation**: If internal discussions fail, consider mediation to resolve the dispute amicably.

4. **Legal Action**: If the situation does not improve, you may need to seek legal advice. Potential actions include:
– **Derivative Action**: A legal action brought by a shareholder on behalf of the company against a director.
– **Unfair Prejudice Petition**: Under Section 994 of the Companies Act 2006, shareholders can petition the court if they believe the company’s affairs are being conducted in a manner that is unfairly prejudicial to their interests.

Executor and Trustee Responsibilities

As executors and trustees of your grandmother’s will, both your uncle and mother have a duty to act in the best interests of the beneficiaries. The will’s stipulation that the money is for the grandchildren must be honored.

Transferring Funds

The suggestion to transfer £300,000 from the executor account to your mother’s bank account should be scrutinized carefully. Executors must ensure that all actions are transparent and in line with the will’s instructions. Mismanagement of estate funds can lead to legal consequences.

Consulting a Legal Professional

Given the complexity of the situation, it is crucial to consult with a legal professional who specializes in corporate and probate law. They can provide personalized advice and help navigate the legal intricacies.

Resources

For more information, you can refer to:
– [Companies Act 2006](https://www.legislation.gov.uk/ukpga/2006/46/contents)
– [GOV.UK – Being a Company Director](https://www.gov.uk/running-a-limited-company/directors-responsibilities)

Remember, this information is for general guidance. Always seek professional legal advice for your specific circumstances.