resigning a directorship

[washed up contractor]

I dont think there's a legal requirement for a director to inform a co director that they are resigning that position. You could say there's a moral obligation if your were friends etc.

However, as others have said, the whole thing looks a bit dodgey to me and Id be wondering if you didnt see this coming? Deffo need to instruct the bank to block any cheques issued \ debit \ credit cards in the name of the ex director. Doesnt sound like you have an accountant though. Obviously, if fraud is suspected, need to contact the Police.

[simondolan]

Hi,

I have been running a small shared contracting business (2 contractors) in the IT finance sector for the last 10 years.

I've just discovered this evening that my business partner resigned her directorship over a year ago, but never told me. (Her husband did the same with his position as company secretary.) I only discovered this through a cursory glance at our company history at Companies House. The same search showed me that she has also signed off a set of company accounts using my name as the director.

I've just about picked my jaw up off the floor. Putting aside how disfunctional this all is, what is the legal position? Surely a director must inform his or her fellow director(s) when resigning? The company address remains her address, so if anything were sent in written form as a formality to the company address then it wouldn't have arrived to me (obviously).

Regards
greene

Before spending a load of time and money with lawyers:

1. Have you spoken to her about it?
2. Did she own shares?
3. Did she have access to the bank account?
4. Has any money gone missing?

Could be a complete misunderstanding.

[greene]

Hi all

Many thanks for the intelligent replies, much appreciated. Some responses to questions asked:

>> Are there funds in the company? Were the accounts accurate? Were they signed off before or after she resigned? Does the company have an accountant, and does the accountant know about all this?

There were funds but I have recently emptied the business account as all the money contained therein was due to me. There is a shortfall. The accounts were managed by the other director. I do not know the accuracy of the accounts, but will be asking for copies thereof in short order.

>> I'd be looking to close the company and open a new one as soon as practical, personally.
First is soon to happen, after advice, and the second has happened.

>> Have you still been paying dividends to the ex director after resignation?
Yes.

>> Have you spoken to her since you discovered this?
Not yet. The temptation was to confront her immediately, but seeing as there is a shortfall in the accounts I am taking advice first and keeping my powder dry. I would like to resolve this amicably if possible, closing the business without being out of pocket. I also need to establish just how out of pocket I am.

>> What are your week to week dealings through the year? Has she been active on a contract using the company? Maybe you thought she was, but she has her own company now opened a year ago.
We worked together on contracts initially, and dealings were fairly regular as the business was new to us. But in recent times contact has dropped off. Not terribly, there have been no fallouts, more just life getting in the way and the business ticking over and taking care of itself (or so I thought).

>> It immediately suggests something nefarious (or something missing from the story you haven't told us).
Yes, something is going on. There is nothing hidden from my side. I haven't fallen out at all with my co-director, I've even been working recently to get her a contract through a friend of mine, so I'm somewhat gobsmacked.

>> I dont think there's a legal requirement for a director to inform a co director that they are resigning that position. You could say there's a moral obligation if your were friends etc.
Interesting. My concern is that I am now wholly liable for the business, and also that business correspondence continues to go to her address! That latter point to me is critical, as I do not know what important communications I have missed.

>> Deffo need to instruct the bank to block any cheques issued \ debit \ credit cards in the name of the ex director. Doesnt sound like you have an accountant though.
There are no more funds in the account, and all parties are aware of that fact.

I'm currently taking advice, I will provide an update on my next steps in due course. As already stated, my principal concern is recover what is due to me, and ensure that I am not wholly liable for outstanding Corp tax and VAT. If I am, and I can't solve this amicably, then it unfortunately will have to be resolved through legal process.

Thanks again all for the input, I was expecting at least a few 'flame' responses calling me an idiot for being so trusting (which perhaps I am).

Cheers
greene

[Lance]

Thanks again all for the input, I was expecting at least a few 'flame' responses calling me an idiot for being so trusting (which perhaps I am).

Nah. People get flamed on here when they are given reasonable advice and ignore it as it's not what they've come here to hear. (or they're proper idiots and you don't appear to be one).

I wouldn't say you were too trusting either. When going into business with someone there has to be some element of trust. Like 'I trust you not to steal all the money' and 'I trust you not to commit criminal fraud'. Without that trust there isn't a business.
I hope it goes OK.

[greene]

Hi all

Just revisiting this thread.

Would anyone be familiar with the process whereby it is not possible to complete annual accounts due to lack of key information? (e.g. non-cooperation of a director, accountant, etc.).

Obviously, I would think that the first step is to inform HMRC. But what actions might follow after that? Would HMRC ask for a 'best effort' presentation of accounts based on business bank account entries, or would they be more proactive and begin an investigation into company activities?

Regards
greene

[simondolan]

Hi all

Just revisiting this thread.

Would anyone be familiar with the process whereby it is not possible to complete annual accounts due to lack of key information? (e.g. non-cooperation of a director, accountant, etc.).

Obviously, I would think that the first step is to inform HMRC. But what actions might follow after that? Would HMRC ask for a 'best effort' presentation of accounts based on business bank account entries, or would they be more proactive and begin an investigation into company activities?

Regards
greene

Any decent accountant would be able to reconstruct a set of accounts using the bank statement data and your input.

[greene]

Any decent accountant would be able to reconstruct a set of accounts using the bank statement data and your input.

Hi Simon

Thanks for the reply.

The problem I have is that there are bank entries that do not relate to my own invoicing, expenses, etc. They relate to the activities of my former co-director.

For instance, a bank withdrawal on their part could be a loan, an expense, a dividend. Similarly, there is at least one credit into the bank account which is not obviously an invoice.

Sorry for not being clearer earlier.

My choices seem to be:
1) work with an accountant and have a good stab at it
2) speak to HMRC about the situation and see if they recommend any other approach

greene

[LondonManc]

Hi Simon

Thanks for the reply.

The problem I have is that there are bank entries that do not relate to my own invoicing, expenses, etc. They relate to the activities of my former co-director.

For instance, a bank withdrawal on their part could be a loan, an expense, a dividend. Similarly, there is at least one credit into the bank account which is not obviously an invoice.

Sorry for not being clearer earlier.

My choices seem to be:
1) work with an accountant and have a good stab at it
2) speak to HMRC about the situation and see if they recommend any other approach

greene

If you've not fallen out with the other director and simply drifted apart, advise them that you have seen a copy of the accounts and it doesn't balance back to what your sums are so you'd like to see their transactions.

[greene]

If you've not fallen out with the other director and simply drifted apart, advise them that you have seen a copy of the accounts and it doesn't balance back to what your sums are so you'd like to see their transactions.

Hi LondonManc

Thanks for responding.

This has been done already on more than one occasion in recent weeks and no response has been forthcoming. It was my preferred resolution to the situation (and still is).

greene

[LondonManc]

Hi LondonManc

Thanks for responding.

This has been done already on more than one occasion in recent weeks and no response has been forthcoming. It was my preferred resolution to the situation (and still is).

greene

Looks like it's the accounting and legal route then.

Good luck - it's certainly not a nice position that you're in. I've read the rest of the thread and the combined advise looks spot on.

The concerning parts of this are the fraud and the potential that they've withdrawn more from the account than they were entitled to.