QLD Director to Director Demands

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Ragnar

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12 June 2017
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Can one Director of a private (Pty Ltd) company demand information from a second Director (e.g. information relevant to the future of the company that is being withheld from them), and can the recipient of the demand refuse or neglect to supply it, or delay sending it?
 

Rod

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I find the question too general to be able to answer.

Directors have a duty to their company and must not derogate from that duty in any way. That may mean they should not withhold information if that information was acquired while working as a director. Some information though may be commercial-in-confidence acquired from another business in which case the director should not disclose it.
 

Ragnar

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12 June 2017
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Sorry. I meant information acquired while working as a director and/or employee (working/executive director). So I guess from your reply that they must provide such information? If so is there any time limit, i.e. how long could they delay providing it if they already have the information in their possession (the enquiring director may merely suspect they have the information). Thanks.
 

Tim W

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I agree with @Rod - your question is too vague to be able to give you a meaningful answer.

Tell us the background and explain for us which side of it you are on?
 

Ragnar

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12 June 2017
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Our business is the Australian distributor for a small number of overseas companies, with one supplier ("S1") comprising over half our sales. There are two equal directors, with no tie-break facility (while there are other shareholders, for historical reasons there are Shareholders Agreements preventing them from having any role in our company, and us from having any role in theirs, other than a restricted number of matters requiring the other group's approval).

The other director ("OD") wished to approach S1 with a view to interesting them in buying our company. However I regarded that as highly risky, since our agreement with S1 allows them to drop us with a month's notice; therefore, the higher the value we could persuade them of, the more tempted they would be to simply take it off us or present a low "take it or leave it" offer. OD knew that the Board (being only we two) would not approve the attempt; but proceeded to do it anyway, claiming "the interests of the shareholders" overrode the Board on this matter.

We have IP for efficient on-site sales of our products, and this is the bulk of our company's value. However S1 indicated that they weren't and would not be interested in it. As OD was showing no understanding of the risks in basically telling our major supplier we were keen to offload their business, I wrote to the S1(with a copy to the other director) contact noting that we were only interested in selling if it included our distribution IP; that since they weren't interested, a sale was unlikely; and assured them that we were keen to continue business as usual. I received no reply to this email from either S1 or the other director.

I have reasons to believe that the reason I received no reply is that OD told S1 something to the effect that anything I said should be ignored. However OD has refused my requests for those communications, and flatly denied there were yet other communications that I am confident must have occurred. Subsequent to the meeting with S1, they sent an email to OD about their decisions (marked "Private and Confidential"); OD has refused to send me a copy of this, though it was sent about a week ago; the spin OD is putting on its contents indicates to me that it confirms that at least some of the risks I feared have indeed happened, and that OD is hiding the fact.

I feel it is both my right and responsibility as a director to be given that information in a timely matter. As it has been refused and/or evaded, I need to know to what extent I can demand it and within what timeframe. I am trying to do this without actually instigating legal proceedings, as I fear that kind of thing (a law suit between the two directors!) will make all our suppliers drop us in a flash. However I hope that a mere better understanding of the legal position will be enough.
 

Rod

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t is both my right and responsibility as a director to be given that information in a timely matter.

It is your right, and his responsibility to give you information that may affect the business.

Reasonable timeframe in this situation would be 7-14 days.