Powers of a director?

Psyche Registered Posts: 187 πŸŽ† 🐘 πŸŽ†
Hi all
I have been approached by a new client who has recently joined a previously one-man limited company as an equal shareholder and director. In going through the company's records he has discovered the existing director has engaged in a number of highly suspect procedures (padding his expenses just being the tip of the iceberg). The company has just finished its first year of trading and hypothetically can now go back and rectify any problems, i.e. disallowing any unjustifiable expenses and re-classing them as repayments of the director's loan. But the client says now he is beginning to uncover irregularities his business partner has become strangely difficult to reach...

His question is: As an equal shareholder and board member what power does he have to force his partner to adhere to the law and correct accounting procedures?

I told him he should have done a due diligence *before* investing in the company, but it's a bit late for that now. Anything he can do other than sell back his share and walk away?

Thanks for any help!

[NB Don't worry, if Director 1 refuses to comply I personally will not be taking on this client!]


  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Not sure how they can technically make the other director adhere to anything. Even if the law is involved that doesn't mean anything and might be more trouble than its worth?

    You may need to make a MLR report (regardless of whether you accept the appointment) if the director will not comply and as therefore is avoid paying taxes with intent.

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