Director / Owner Redundancy

[John T 82]

Hi,

I am an owner ( 48% ), director and employee of a family run construction company.

Is there any reason I could not be made redundant as any other employee. As far as I’m aware there is no issue with this as a director/ employee but does the fact that I’m also an owner make any difference?

Thanks in advance.

 

[ChrisCallaghan]

So long as you are a PAYE reg'd employee of the company, you would at least be entitled to statutory redundancy. If you choose to make yourself redundant though, and pay yourself out whilst the company is in financial difficulty, this can cause some complications.

For context can I ask what's prompted you to consider this?

 

[John T 82]

So long as you are a PAYE reg'd employee of the company, you would at least be entitled to statutory redundancy. If you choose to make yourself redundant though, and pay yourself out whilst the company is in financial difficulty, this can cause some complications.

For context can I ask what's prompted you to consider this?

The company is not in any financial difficulty. We are in the process of winding the company down so are not taking on any new work. I am leaving the country for 3 months in January and when I return I plan to eventually work on my own with a separate company when all the outstanding work is completed and the company is wound up. I’m told as I’m going away for 3 months I have to resign my directorship which I don’t think is correct??

As far as I understand, my options are to remain as I am and take a 3 month break, resign or to be made redundant.

 

[Frank Wessely]

Hi John T 82

I think that you have to separate your responsibilities as a director from those as an employee.

No you do not have to resign your directorship. However did you sign a service contract which provided for this type of scenario? Alternatively are there any other Board Agreements or company constitutional documents which might be applicable?

In terms of employee status, your options will be determined by your employment contract and what else can be agreed upon or negotiated with your employer.

Thanks.

 

[John T 82]

Hi John T 82

I think that you have to separate your responsibilities as a director from those as an employee.

No you do not have to resign your directorship. However did you sign a service contract which provided for this type of scenario? Alternatively are there any other Board Agreements or company constitutional documents which might be applicable?

In terms of employee status, your options will be determined by your employment contract and what else can be agreed upon or negotiated with your employer.

Thanks.

Hi Frank,

Thanks for your reply.

I have not signed a service contract / employment contract and there are no board agreements or applicable documents.

It’s a small family company and my sister and I are the owners 48 / 52.

She had said that I would have to resign my directorship as I’m going away for 3 months and also that I could not be made redundant as I am an Owner / Director. This doesn’t sound correct to me as I am also an employee and I would just like to check that I’m right on this.

Thanks.

 

[Gyumri]

The company is not in any financial difficulty. We are in the process of winding the company down so are not taking on any new work.

That doesn't sound like a redundancy situation so there's no point in resigning as a director simply because you want to take a break for three months.

If you did resign then you wouldn't be able to make a redundancy claim anyway.

 

[kulture]

You are entitled to redundancy if the job is going and you have been employed over two years. Being a director o shareholder does not affect this.

 

[John T 82]

See below the response I got when I asked for an explanation.

“Yes and that would be fine if you were just an employee and a director but you’re not - you’re an owner. You have ongoing shareholder and director responsibilities and the company is not being liquidated, so you can’t pay yourself a tax free redundancy payment and claim corporate tax relief on that payment.

There are also significant tax implications of the shares you were gifted which will need to be declared on your tax return this year. You can’t claim holdover relief and then make yourself redundant. “

My sister is an accountant, I am hands on out on site so I’m not well versed on this stuff.

On one hand I’m told I can’t be made redundant because I have ongoing director / owner responsibilities but She wants me to resign my directorship as I’m going away for 3 months. Confusing.

 

[NicoJ]

Nothing you've said on this thread suggests that the position you have is being made redundant. You've just decided not to do the job, the job hasn't gone away.

I would suggest that you need advice independent of your sister to make sure that your best interests are represented here and you can negotiate the best deal for you.

 

[Gyumri]

There are also significant tax implications of the shares you were gifted which will need to be declared on your tax return this year.

Who gifted to you your shares? It is not you who would need to account for the capital gains but the donor - unless the donor was your spouse.

 

[John T 82]

The activities that I look after are coming to a stop in a few weeks time so technically, yes my position is becoming redundant, I could remain and perform other general duties while others are made redundant but I’m considering continuing the activities on my own with a new company.

 

[John T 82]

Who gifted to you your shares? It is not you who would need to account for the capital gains but the donor - unless the donor was your spouse.

Shares were gifted from my father.

 

[fisicx]

You can be made redundant as an employee but still remain as a director and shareholder. Going away for three months doesn’t mean you have to resign as a director.

The only question is if this is a real redundancy. All directors have to agree on employee futures and any redundancy package. And it looks like your sister won’t agree. So just resign your job but keep collecting dividends until the company folds.

 

[MikeJ]

Given you're going to be out of the country for three months, are you able to continue to do your duties as a director? You may not "have" to resign, but I can see your sister's point of view.

 

[fisicx]

A mate of mine lives in Spain and is a director of a UK company. He manages to fulfil his duties without any issues. Doesn’t even come back for board meetings, it’s all done over zoom.

 

[MikeJ]

Not saying it isn't possible, but without knowing the details the sister may have a valid argument.

 

[Gyumri]

John T 82 said:
"There are also significant tax implications of the shares you were gifted which will need to be declared on your tax return this year."

There would be no tax implications for you to declare on your self-assessment return if you haven't sold your shares so I can't see what your sister is getting at. An independent accountant might be better than relying on your sister.