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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

Disputes between directors of a company are, unfortunately, not uncommon. When there are several parties involved in a company as directors and shareholders, it perhaps not surprising that disputes may arise from time to time.

Whilst directors’ disputes can occur for many reasons, and each set of circumstances will be unique, most disputes will commonly occur when the relationship between directors or shareholders has broken down and the parties have determined that they can no longer work collaboratively.

Disputes may arise in the following circumstances:

  • there is a disagreement over the direction of the business involving the company’s management, business strategy, or ownership and control;
  • directors fail to fulfil their duties;
  • directors steal funds, intellectual property, or commit fraud;
  • there is a conflict of interest; or
  • there is a disparity between the remuneration of directors.

These disputes can dramatically impede business growth and threaten the company’s ability to trade, as the focus shifts to managing the dispute at hand rather than focusing on the growth of the business.

What duties are owed by directors to a company?

Directors owe a number of duties to a company under the Corporations Act 2001 (Cth). These include the following:

  • Duty to act in good faith and in the best interest of the company;
  • Duty to exercise care and diligence in discharging duties and making business decisions that a reasonable person would exercise if they were in the same position as the director;
  • Duty not to improperly use position to gain advantage or obtain information for personal advantage;
  • Duty to disclose a material personal interest; and
  • Duty not to trade while insolvent.

How can directors’ disputes be best avoided?

There are different options for resolving director disputes as follows:

Shareholders Agreement

Normally, directors will own shares in the company in which they are a director. Having a shareholders agreement in place can serve as an effective means of setting out penalties for directors that engage in bad behaviour or damage the business.  It can also provide an agreed roadmap for the exit of a shareholder and how their shares should be valued.  

In the absence of a shareholders agreement, a company can be left in the position where an ex-director remains a shareholder in the company. This most likely means the director will have voting rights and can have an impact on the direction of the business. A well-drafted shareholders agreement can, for example, set out that a director must resign and sell their shares if they breach the document.

Seeking Advice

If a dispute between directors occurs, independent legal advice should be sought on the company’s position, whether a shareholders agreement is in place or not. This will allow parties to explore the company’s options and how to approach the problem.

Meeting with the Director

Depending on the advice, a meeting between directors in a neutral location may be a useful means of discussing what went wrong and what the desired outcome is for both parties. The discussion should be based on the legal advice both parties have received.

Resign or Sell Up

If directors have resolved that they can no longer work together, a director may consider resigning from the directorship.

Voluntary Administration

In some cases, a dispute between directors orshareholders may be so acrimonious that the only viable option is to place the company into voluntary administration. This decision will depend on the financial health of the company and the attitudes of other shareholders.

Legal Proceedings

If the matter is unable to be resolved through these options, then legal proceedings can be instituted if there aregrounds for doing so. The Court will have power to make orders regarding the resignation of directors, selling shares back to the company and issuing public apologies.

How Can Sharrock Pitman Legal Help?

If you require advice on confirming your position in a dispute and what options are available, as well as understanding the company’s legal position before commencing legal proceedings, we are happy to assist. As Accredited Commercial Litigation Specialists, we are well-equipped to provide expert legal advice relevant to your unique circumstances. Contact our litigation team on 1300 205 506 or by email at litigation@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by a member of our Legal Team

,

.

Lynda Lim

For further information contact

Lynda Lim

Lynda is a Senior Associate of Sharrock Pitman Legal. She is part of our Litgation team. For further information, contact Lynda Lim on her direct line (03) 8561 3330.

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Commercial Law

Disputes between directors of a company are, unfortunately, not uncommon. When there are several parties involved in a company as directors and shareholders, it perhaps not surprising that disputes may arise from time to time.

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.