LTD Company with 3 equal shareholders and 2 Directors

Lizzieee89

If I am starting a property company with 2 people, and I own 33.3% (one third) of the company just like the other 2 shareholders, what am I really missing if I am not a Director?  Do I have the same voting rights for director's salaries, payouts etc?    I understand that banks require any shareholder above 25% ownership to be a guarantor, so there's not really any difference between shareholder and director on that front.

Jeremy535897

It depends on the legal documents, but if you are not a director or employee, you can only take money out of the company by dividend.

Lizzieee89

For a company with 3 equal shareholders who all have their own LTD companies, is there anything one can do to stop 1 director + 1 shareholder, or 1 director + 1 director, getting together and dictate what management fees (not dividends) to pay their respective LTD companies?

Jeremy535897

Again, it will depend on what the legal documents say, like the articles of association of the company.

The structure sounds complex, and you have to be careful what is tax deductible in an investment company.

DullGreyGuy

Lizzieee89 said:

For a company with 3 equal shareholders who all have their own LTD companies, is there anything one can do to stop 1 director + 1 shareholder, or 1 director + 1 director, getting together and dictate what management fees (not dividends) to pay their respective LTD companies?

Ok, so now you are saying its more complex... so there are two human directors and 3 corporate shareholders?

In general the two directors are responsible for the day to day running of the company and the shareholders provide the capital/take the financial risk but receive the dividends of that risk. If shareholders are unhappy with how the directors are acting then there are mechanisms they can use to remove them (there is currently a whole thing going on about removing the Exec Chair of R&Q with various corporate shareholders calling for his removal and others saying he should stay for now).

Articles of Association are key as they describe how the company's governance will work and things can vary from the norm if that's what's desired. 

Ultimately these things are a democracy though, and so there will always be a risk that two of the three gang up. I know when my father set up his three way company it was also recommended that it was a 34%/33%/33% split such that if an agreement cannot be reached you aren't in deadlock with three different options each with 1 vote. Naturally this means one person has a tiny bit more influence than the others. 

Lizzieee89

DullGreyGuy said:

Lizzieee89 said:

For a company with 3 equal shareholders who all have their own LTD companies, is there anything one can do to stop 1 director + 1 shareholder, or 1 director + 1 director, getting together and dictate what management fees (not dividends) to pay their respective LTD companies?

Ok, so now you are saying its more complex... so there are two human directors and 3 corporate shareholders?

In general the two directors are responsible for the day to day running of the company and the shareholders provide the capital/take the financial risk but receive the dividends of that risk. If shareholders are unhappy with how the directors are acting then there are mechanisms they can use to remove them (there is currently a whole thing going on about removing the Exec Chair of R&Q with various corporate shareholders calling for his removal and others saying he should stay for now).

Articles of Association are key as they describe how the company's governance will work and things can vary from the norm if that's what's desired. 

Ultimately these things are a democracy though, and so there will always be a risk that two of the three gang up. I know when my father set up his three way company it was also recommended that it was a 34%/33%/33% split such that if an agreement cannot be reached you aren't in deadlock with three different options each with 1 vote. Naturally this means one person has a tiny bit more influence than the others. 

Thanks for your response.  Interesting!  So when it comes to voting on who gets paid what amount, the shareholder who has the same amount of shares as the directors should have the same amount of say/voting right than the others...I hope I'm understanding this right?  I don't remember signing any legal documents about the company formation, it was more like a "3 friends start a company scenario" but after a while friends stpo being friends