Control over a company

[itayshap]

Hello,
My question concerns control over a company with a majority of directors.

Assuming a buy to let company with 4 partners each has a 25% stake in the company.
Partner 1, 2 and 3 are directors in the company whereas partner 4 is not.
If partner 1+2 join forces, do they have legal right to control the company ?
For example, can they decide who will be the solicitor of the company or which property management agency to hire without the permission of the other partners?

Do they have any control whatsoever ?

Thank you,
Itay
 

[Kerry Chan]

Hi Itay

It is important to separate the concepts of shareholding and directorship.  Directors are the ones who run the company (irrespective of their shareholding).  Shareholders are the ones who own the company and are not running the company (though shareholders have certain limited rights and any other rights given under the articles / agreement).

In general, this means that Partners 1, 2 and 3 (as directors) can control / run the company by a simple majority (unless otherwise stipulated in the articles).  Thus, as long as two of these three directors (such as Parts 1 and 2) agree, they could, for example, appoint a solicitor for the company and select the management agent for company property.

May I ask if you have a shareholder agreement and a management agreement in place?

For the avoidance of doubt, the above (a) does not constitute legal advice (and no lawyer-client relationship is formed in any way) and (b) is set out for your reference only.

Kerry