Legal Question in Business Law in United Kingdom

Gridlock situation regarding shareholder vote

Overview - limited company with 4 directors each with an equal share

Problem - A vote has been carried out regarding some proposed works, 2 of the directors have consented 2 of the directors have withheld their consent

Questions - 1)Can the proposed works still go ahead 2) Do the directors who have withheld their consent have the authority to assert that the company has withheld consent 3) Can the 2 dissenting directors obtain legal advice in the name of the company in this instance meaning all directors are then liable for this cost 4) Can they be prevented

Summary notes - The company is not a formal trading company it is a property company that acts as landlord for our building. Each flat owner is owns a share of the freehold by being a shareholder/director of the company as mentioned above. I'm having problems with 2 dissenting directors who object to my plans to remodel my flat

Help greatly appreciated in order to take next steps


Asked on 2/06/07, 7:56 am

1 Answer from Attorneys
Richard Howard Richard Howard & CO

Re: Gridlock situation regarding shareholder vote

1. Assuming that the vote has been carried in accordance with the company's articles and the articles require a majority then the board decision will not have been carried and the vote would not be able to proceed.

2. The Company has withheld its consent since the approval has not been passed.

3. There does not appear to be any reason for the company to seek legal advice unless there is concern on the part of the directors as to the proper procedure for voting on these issues. The boards needs to approve the taking of legal advice by a majority. Even if such legal advice was taken the directors would not be liable for payment for the advice, only the company would be.

4. If this is a question as to whether the minority can be prevented from seeking the advice on behalf of the Company the answer is yes.

It does not appear that the disagreement is an issue about the internal workings of the freehold company, it is more a landlord and tenant approval issue and the wording of the lease is more important to look at than the company law aspects.

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Answered on 2/07/07, 8:37 am


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