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Company director unfairly excluded after attempted affair

Posted: 30th July 2014   In: Corporate Commercial

A court has ruled that a director who tried to start an affair with his business partner’s wife was unfairly excluded from the management of a company in which he held shares.

The case involved two men who had been close friends and operated their business as a quasi-partnership.

Things turned sour when the director started sending suggestive texts and making phone calls to his partner’s wife.

When the partner found out, he called an extraordinary general meeting and appointed his nephew as a director. He then removed the ‘offending’ director from his position at the company.

The dismissed director brought an action claiming that he had been excluded from management without any offer to acquire his shares at a fair value.

He also said that it had been unfair to issue the nephew with shares as it diluted his stake in the company.

The court ruled that the director had been unfairly excluded from the company. It also ruled that the true motivation of the allotment of shares to the nephew had been to dilute the interest of the dismissed director to below 50% and therefore remove his ability to block resolutions.

The court ordered that the partner should acquire his former colleague’s shares on the basis that he owned 50% of the company.

The former director wouldn’t be compensated for his loss of salary because a working relationship would not have been possible after he had betrayed his business partner.

Please contact Simon Porter for more information about the issues raised in this article or for advice on any aspect of company law.