Shareholder Relationship Breakdown & Disputed Debtors

October 4, 2016

Shareholder Relationship Breakdown & Disputed Debtors

Company X was incorporated in August 2013 and began trading in October 2013. It operated in the construction industry, specialising in drywall and jib installation and plastering.  The company has three Directors and Shareholders – two with 30% Shareholdings and the third holding the remaining 40%.

Each of the Directors/Shareholders played a different role in the operation of the business. One Shareholder dealt with the accounts and business management, one Shareholder carried out the construction work and the third Shareholder was an investor only.

Over time, disputes were beginning to arise and due to a serious lack of communication between the directors, they were not being resolved. Therefore the company’s invoices that were disputed by customers, were not being paid. This led to a lack of cashflow which ultimately saw the failure of the company.

Dealing with company debtors has been the most time consuming aspect of this liquidation and what was initially thought to be a straight forward Shareholder appointment has ultimately led to much less funds being available for creditors, given the costs involved in resolving disputes and liaising with each of the Directors separately. It is unlikely that there will be any funds available for the Shareholders upon completion of the liquidation.

 

Lesson for Shareholders.
Communication between Directors and Shareholders is key. You may be good at what you do, but if you are unable to keep on top of the office pressures, ensure you engage professional advice.

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