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Father granted access to business records in family dispute

August 16th 2021
 

A father has been granted access to information concerning the family businesses of which he was a director.

Mark Aspin Director & Head of Dispute Resolution reports on this recent case.

The issue arose because he was in dispute with his son and daughter-in-law, who were also directors.

The family business comprised of companies that operated residential care homes. The father and mother established and ran it on their own for many years before their daughter and son became company directors in 1999 and 2015 respectively.

A few months after the son joined, the daughter resigned when it was discovered that she had wrongly diverted £720,000 from the business to one of her own companies. She agreed to repay the money but failed to do so.

The mother died in 2017 and the son’s wife became a director of the companies. The father lived with the son and wife until 2020. He then moved in with the daughter and lodged a petition against the son and wife under the Companies Act 2006, alleging that they were excluding him from participating properly as a director by preventing him from accessing company information and records.

The son and wife asserted that the father had lost interest in the business, and the daughter was unduly influencing him and driving the petition out of spite, partly because they had obtained a judgment ordering her to repay the money she had taken.

They expressed concern that if the father had access to company information, the daughter would use it to evade her liabilities.

The father, who was 85, submitted that he should be given access to the companies’ information and records pending trial; and that the son and wife should be removed as directors because they were mismanaging the company, leaving him as sole director with a manager to assist him.

The High Court said it was appropriate to grant interim relief ensuring that the father had access to the companies’ information to enable him to participate effectively as a director pending trial.

This was because he was entitled to participate in the management of the companies and a director had the right under the general law to inspect the books and records.

There was no reason why the information should cause concern regarding the judgment debt owed by the daughter. In any event, the father had confirmed that he would undertake not to share the information he received with her and to only use the documents for the purpose of performing his director’s duties.

However, it was not appropriate to order that the son and his wife be removed as directors because there was a substantial dispute as to whether it would be appropriate to grant an order at trial that the father be given the right to buy out the son and wife and take over control of the companies.

It was also likely to be destabilising to the companies to remove the two most active current directors, whatever the rights and wrongs of them being currently the most active.

It would require cogent evidence to show that it would be prudent to leave the father as the sole director, considering his age, his admission that he was not capable of managing the companies on his own, and the fact that he had not been involved in the business for some time.

Although there were some legitimate and unanswered questions concerning the son and wife’s operation of the companies, those concerns could be substantially addressed by requiring them to give undertakings regulating their conduct of the companies pending trial.

If you would like more information about the issues raised in this article or any aspect of company law please contact Mark on 01228 516666 or click here to send him an email.

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