Hillingdon Solicitors

HILLINGDON BUSINESS LAW FAQS

What does wrongful trading mean?

Wrongful trading covers acts and omissions of company directors which fail to reduce or minimise the loss of debtors in the event that it is reasonably obvious to the directors that the company is at risk of being liquidated.  So, if the company continues to conduct business in the same way as if it is financially healthy, yet it is reasonably obvious and clear that the company faces liquidation, that will be considered wrongful trading.

Can directors issue shares?

Directors who do not have a say in the daily management of the company which only issues one type of share can issue shares without the consent of the shareholders.  Nevertheless, this is subject to any stipulation of the article’s which state otherwise.

How can I call a shareholder meeting?

Directors can call a shareholder’s meeting by directly sending notice of the meeting in writing to the shareholders.  The notice must be issued at least 14 days before a meeting and state the location and date and time of meeting, as well as reminding the shareholder of their right to appoint a proxy to attend in their place.  For meetings with shareholders who control 90% of the voting rights within the company, a shorter notice period will suffice.

Can I sell my shares without restrictions?

It completely depends on the articles of association/any shareholder agreements in place.  There are several different possibilities.  You might, for example, be able to sell your shares so long as you offer the shares to any existing shareholders first or transfer the shares to a family member.  If your company does have restrictions in place, you should follow them or confirm their legality with a solicitor if in doubt.  For a share transfer to be valid, it needs to be registered and failure to follow procedures could result in a director refusing to register any sale.

How does the percentage of shares I hold influence the rights I have within a company?

Generally and simply speaking, the more shares you have, the more say you will have in how a company is run subject to any restrictions in shareholder agreements and articles of association (particularly stipulations designed to protect minority shareholders from being unfairly prejudiced by majority shareholders).  If you have a five percent shareholding, you will be entitled to call a general meeting.  For a twenty five percent holding, you will be entitled to block a special resolution (a resolution requiring a 75% vote in favour as compared to 50% for an ordinary resolution).  It naturally follows that a 50% shareholder will allow you to pass ordinary resolutions despite any votes against you and a 75% holding will allow you to pass special resolution.

What’s the purpose of a partnership agreement?

Partnership agreements are used to dictate the relationship between partners in a business structured as a partnership.  Without a partnership agreement, partners will be jointly and personally liable for debts and have an equal say in the running of the business.  A partnership agreement is used to define the scope of each partners responsibilities, duties and obligations.

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