WA Company Directors Dispute - Can Business Partner Raise Capital Without Consent?

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Grewell

Active Member
19 August 2016
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Background:

I have had an ongoing dispute with my business partner. We are both 50% shareholders and both company directors. Over the past 18 months, he has excluded me from the operations of the business, removed me from bank accounts of the company and denied all requests for financial data of the company. He has also changed the company register with ASIC to remove me as a director ( I asked a question on here previously about this).

Now as more time passed, I have had no success with ASIC as yet, but have been able to gain access to bank statements from a complaint to the Financial Ombudsman Service. He offered to buy my shares for virtually nothing at all, based on the company having significant debt and my shares holding no value.

I refused the offer for 2 reasons, one being that the amount offered was less than 10% of the money I had put into the company, (he is now denying any debt owed to me by the company), and two he still won't provide me with financial data to verify the exact financial position of the company.

Based on a review of the company bank statements, there have been a large number of transfers from the account to his own personal account and back again but the amount coming back is significantly less. I asked for an explanation about these transactions and what the money has gone to. The response i received from his lawyer was simply that the money had been used to pay creditors and company debt. Don't see any valid reason why this had to be done from his personal account the way it was unless he is trying to hide something. His lawyer also has stated

"the company has engaged its own solicitors to advise it in relation to a capital raising, which you will be invited to participate in, to enable it to trade out of its financial difficulties"

I assume this means he wants to bring a friend or family member in as a shareholder and as a result reduce my percentage of ownership (obviously I wouldn't put more money into a company that i am excluded from and is denying the existence of money already owed to me).

My question:

Is it possible for him to decide to try and raise capital and bring another shareholder in without my consent as a director, and can he do so reducing my share in the company?

Any help would be greatly appreciated.
 

Rod

Lawyer
LawTap Verified
27 May 2014
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Think it is time to see a lawyer.

It is illegal to dilute your shareholding without a meeting and vote. Can't remember if an ordinary resolution (more than 50% of votes) or a special resolution (75% or more) is needed to issue shares but your lawyer will know or at least find out. Either way you should be OK if you hold 50% unless he commits fraud, which is a possibility based on him removing you as a director without authority.
 

Grewell

Active Member
19 August 2016
6
0
31
Think it is time to see a lawyer.

It is illegal to dilute your shareholding without a meeting and vote. Can't remember if an ordinary resolution (more than 50% of votes) or a special resolution (75% or more) is needed to issue shares but your lawyer will know or at least find out. Either way you should be OK if you hold 50% unless he commits fraud, which is a possibility based on him removing you as a director without authority.


Thanks Rod, I appreciate you taking the time post a response, again. I have been already spent considerable dollars with the lawyer, sending letters that he just chooses to ignore when the questions become too hard for him to answer so have been trying to limit my costs until it is time to go to court, but I agree it is probably that time now.

Just frustrated that the system requires me to spend my money on action that will ultimately result on the company being wound up and my money lost, when he is the one who has acted dishonestly. Such is life I guess.

Thanks again for taking the time to respond.
 

Rod

Lawyer
LawTap Verified
27 May 2014
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I fully agree with your sentiments.

With people like your business partner, it probably is best to cut all ties and avoid all future contact with him. Unfortunately there are people like that around.

Once you get your evidence together plan your next steps well and involve the authorities where it is appropriate.