Director breached his duties by assuming too much control

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

The director of a family farming business has been found in breach of his duties under the Companies Act 2006 after he had taken steps to appoint a board within his control.

The company had been incorporated in 1960. David Metson and his brother Samuel were both directors and owned shares themselves and for other family members. 

David was one of the senior figures within the business and allegedly began to make decisions without consulting the shareholders or his fellow directors. 

These included appointing his wife as director without the board’s authority and acting as chairman at meetings without being elected, including exercising casting votes. 

In July 2020, he paid dividends to some preference shareholders, leaving them without the right to vote over future company decisions. 

Samuel and other senior figures in the business took legal action to curtail David’s actions and limit his power. 

The court found David to be in breach of his duties under the Companies Act. 

Appointing his wife as director without the necessary support and paying dividends to preference shareholders to diminish their influence were just two of his breaches. The court declared that David’s wife and another of his appointees were not directors. The court also made a declaration that David had not been elected as Chairman. 

Judge Greenbank then addressed some of the other issues where David had breached his duties and said: “It is not uncommon in relation to successful petitions for the court to provide for the purchase of the shares of some members of the company by other members or by the company itself.  

“Such an order would not be appropriate in this case. This is a family company, in which all family members were intended to participate.” 

He added that he would hear further submissions at a future hearing if necessary if the parties were unable to reach agreement following the court’s decisions.  

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