What can I challenge as a trustee? Is this legal? Conflict of interest?

[Pregnantabroad]

I'm a trustee of a trust which benefits from dividends from a Ltd company (the trust is one of 5 shareholders of the company). There are 2 other trustees and both have recently been appointed as directors of this company.

Without notifying me they have started paying themselves (they don't know that I know yet). The amount that they are paying themselves equates to more than last year's dividends paid to the trust.

So my questions are ...what can I challenge as a trustee?
Do they have a conflict of interest as a result of paying themselves?
Should I have been notified or even had a say in their decision to pay themselves.

Note - only the 'first-named trustee' gets to vote as a shareholder. I'm not the first-named trustee.
Thank you!

Directors control the company. They can be paid for their services.

Directors are entitled to remuneration, it’s got nothing to do with their position as trustee, although I appreciate it can get confusing.

Trustees do have a duty to act in best interests though.

So being directors who are paid a reading director fee, replacing other existing directors -probably Fiume.

Being added on as directors to get paid and reduced dividends payable to shareholders-not fine.

Don't the other 4 shareholders need to approve these new directors or have the power to remove iif they are taking the mick?

Tale legal advice from a firm that does company law as well as private client/ trust law. The individuals now wear two hats and have legal duties under each one. These may conflict depending upon the circumstances.
For example, as directors they have a duty to act in the best interests of the company, which in effect means all of its shareholders. If directors fees are excessive, this won't be the case. You need to get advice and soon

If the directors fees are excessive the shareholders should vote them out of office. If not there is no issue. Dont see what legal advice will achieve. Unless someone is going to sue them

There is an issue! Legal advice is needed. Acting as a trustee the poster has her own legal duties to the trust and she appears to have reasonable grounds for suspecting a conflict of interest of the other trustees!

As trustees you (three) are merely minority shareholders in a company. You duties relate merely to the safeguarding of the shares and use of any dividend income for the purpose of the trust. If the company is mismanaged, even by your fellow trustees there us not much you can do in company law and you have no duty to spend your own time.and money to investigate it as trustee. You should instead get the other shareholders on side so that they as a majority can wield power over the directors.

The current director / chairman was appointed a year ago. The previous director (for many years) did not take a salary. The new director then appointed other people as directors, 2 of which are his family members and all are being paid (without letting shareholders know).

unfortunately the main director who has taken these decisions has enough % of the vote to act as he wishes. He is a shareholder himself and is lead trustee of 2 trusts which also have votes.

It sounds like the company is now run by, and majority owned by some individuals who are acting in their own interest. This is always a risk for minority shareholders. At least if there are ever any dividends they must be shared out to all shareholders. If there arent anymore dividends then unfortunately the trust beneficiary will lose out on that income. Im not sure what action, if any, a minority shareholder can take in the circumstances. but you arent really even one of them so you are powerless i would think

Are they being paid by the company or the trust?

While directors can appoint interim directors, these needs to be agreed by the shareholders and an EGM/ AGM. Has that happened?

Alternatively, if they have the job title director, but aren't statutory directors, they are employees and can be employed by the company without shareholder agreement.

If the original director isn't following the wishes of the shareholders, the shareholders will have to vote to remove him as statutory director

the company

they are statutory directors ( I think...listed on Companies House)

As they are employed by the company, the fact their salaries exceed the dividends paid to the trust is irrelevant.

If the person you refer to as the main director controls more than 50% of the shares, he can appoint whoever he wants as a director and pay them whatever he feels is appropriate. You don't personally get to vote on that. You ought to be consulted on how the trust casts its vote but, as the trust is only a minority shareholder, that wouldn't change the outcome even if you convinced the other trustees to vote against the main director's choices.

The real question is whether the trustees are able to act in the best interests of the company (as directors) and the trust (as trustees). Since the trust is a shareholder, its best interests would be if the directors of the company act to maximise shareholder value over the long term. Since that is what directors are supposed to do, there is no conflict. Where there may be a conflict would be if they were maximising their personal income at the expense of the trust and other shareholders, e.g. if they are being paid significantly more than the market rate for acting as directors.

Whats the market rate for Directors? 🤣 Sorry op plenty of people will tell you what the individuals are supposed to do but not much advice as to what you can do if they don't. In my opinion nothing. Dont waste your own money or the trust's on a fools erand trying to fix this. Corporate lawyers will happily listen to this send you a bill for £500 and tell you the same