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A very public row has engulfed the family company Sherlock Holmes International Society Ltd, which owns the Sherlock Homes museum, over disputed withdrawals of funds of more than £2m  from the company’s coffers by a member of the family.  A winding up petition was filed in the High Court in 2014 by the sole Director but then other members of the family opposed this, on the ground that the Director had not been validly appointed and therefore had no power to file the petition.

 

The company’s Articles only permitted shareholders to be Directors and the sole Director was not a shareholder at the time the petition was issued.    However it seems that on previous occasions, other non-shareholder Directors had sometimes been appointed at the company’s AGM.  The High Court had to decide whether the shareholders had by implication/conduct changed the Articles to permit a non-shareholder to be a Director, even though no steps had been taken to formally change them by company resolution and filing the change at Companies House.

The High Court found that in certain, restricted, circumstances the Articles could be changed by conduct and probably had been changed permanently, however in fact the Director had no authority to file the winding up petition anyway.  This is because all Directors had to be re-appointed at each AGM and his term of office had expired before he filed the petition.   As he was no longer a Director at the time he filed the petition, he had no authority to do so.

 

This has all turned out very expensive for the parties and results from a failure to check the Articles at the relevant times by everyone concerned.

It would have been interesting to know what Sherlock would have made of all this !

 

Mark Barrett is Head of the Commercial Dept and deals with company law matters at LLB

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