Director/shareholder diverting revenue

[Donkeyman]

My friend is a 40% shareholder of a small limited company (Company 'A') with 8 employees. There is one other shareholder who holds 60% and is also the sole director of company 'A' having been appointed 6 years ago.

I discovered last week that the director started another company (company 'B') with a very similar name 3 years ago with her boyfriend. They are both directors of company 'B' with 60% and 40% shareholding respectively.

My friend had no idea company 'B' existed until I discovered it last week. Curiously, the only evidence that company 'B' exists is on Companies House website.

Company 'A' is a bricks and mortar business, that has been established for over 30 years and has a very healthy turnover from 3 revenue streams. It has tangible assets, intangible assets etc.The shareholder's fund stands at £800,000

Company 'B' has been established for 3 years and doesn't have any apparent revenue stream. It doesn't have tangible assets or intangible assets etc. The shareholder's fund stands at £83,000.

The latest accounts from Companies House for company 'B' show £45,000 'cash at bank' for yr end 2022 then £99,000 for yr end 2023. After tax the money has been put straight into the 'shareholder's funds' of company 'B'.

It appears that the director of company 'A' has introduced another PDQ card machine into the bricks and mortar business for occasional use that pays directly into the bank account of the 'ghost' business 'B' where she and her boyfriend are directors.

Is this normal accepted business practice?

[Pezza54]

Please read the articles at http://www.draycottbrowne.co.uk/busi...tion-directors and
www.draycottbrowne.co.uk/fraud/tax-evasion
Your friend is legally responsible for company A debts only up to the value of his or her shares

If the company director is acting fraudulently, falsifying company accounts, the profitability of company A is affected and the correct amount of company tax not paid.

Your friend should challenge the director about payments of company A income going to another business, to protect his or her shares investment

T

[PallasAthena]

Donkeyman It's up to you whether you take up Dickinson458's offer but if I were you I would be very wary of giving my personal information to a complete stranger online who asks for it and wants to advise off-forum where their advice cannot be reviewed or challenged by other forum members. Especially someone who has only recently joined this forum, made only three posts, and has ignored a request to post a bit of info about himself and his background so forum members can be assured of his intentions.

[atticus]

I have drawn post #2 to the attention of the forum administrators.

To Donkeyman - what you say indicates possible breaches of company law and of directors' fiduciary duties. In order to decide whether to take action, you will need to gather a fair deal more information.

Might it be an idea to speak to the other director about company B, preferably in a calm and non-confrontational way?

[atticus]

Sorry, I meant post #3, not #2.

[Donkeyman]

Many thanks all for your replies. Hopefully we can speak to the director and ask her, nicely, for an explanation. However, my when friend asked her if she had leant her boyfriend's building company money from company 'A' to buy a plot of land without her knowledge the director flew off the handle so I don't expect things will go well. The director and her boyfriend set up a building company in 2020 (company 'C') and are both directors of it. We know approximately £400,000 of company 'A' money went to company 'C' to buy the plot.
Oh what a tangled web....
Thanks again all.

[PallasAthena]

Sorry, I meant post #3, not #2.

Due to admin deleting the post you were referring to Post #3 is now mine but I know your original comment was directed at the now deleted post by Dickinson458, as was my earlier post (I'm saying this only in case newcomers to the thread start wondering what's going on!)