Exit plans, directors, shares and fighting for your life!

pentel

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  • Mar 12, 2011
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    Your starting position might be the amount the owner would walk away with if the business was closed. Assets at fire sale prices + cash in bank + a % of outstanding debts. LESS all creditors, redundancy payments, VAT, holiday pay, claims etc. This will probably be far less than you expect.

    Possibly that cup of coffee mentioned earlier.
     
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    Beaniecheese

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    Nov 9, 2022
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    So I'm looking to leave and start my own business in January. Does anyone know if I rent an office tomorrow, furnish it, get my branding done, website created, everything ready for when I leave. If that is in breach of me being a Director as it would be a conflict of interest (companies house act 2006 section 175)?

    I've recently learnt that the MD has issued shares to his children. This was done at a meeting with the two other directors, without me present. Although I was at the office at the time. I would like to know how serious this is?
     
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    So I'm looking to leave and start my own business in January. Does anyone know if I rent an office tomorrow, furnish it, get my branding done, website created, everything ready for when I leave. If that is in breach of me being a Director as it would be a conflict of interest (companies house act 2006 section 175)?

    I've recently learnt that the MD has issued shares to his children. This was done at a meeting with the two other directors, without me present. Although I was at the office at the time. I would like to know how serious this is?

    Your contract may have specific provisions around this.

    Otherwise, simply setting stuff up won't be a conflict.

    You can expect pushback on things like customer information (that fuzzy area between memory and data!)
     
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    Beaniecheese

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    Your contract may have specific provisions around this.

    Otherwise, simply setting stuff up won't be a conflict.

    You can expect pushback on things like customer information (that fuzzy area between memory and data!)
    All the client numbers are on my personal mobile phone as we've never been given company mobiles. I do all my day to day sales call on my mobile number, and have had that number for over 25 years.

    Is the line drawn when you make a sale then?
     
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    All the client numbers are on my personal mobile phone as we've never been given company mobiles. I do all my day to day sales call on my mobile number, and have had that number for over 25 years.

    Is the line drawn when you make a sale then?
    To the best of my knowledge there is no hard and fast line, but I'd say you are at risk of crossing it when you start marketing/promoting as a competitor, or if you deliberately stop adding value in your current role
     
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    Beaniecheese

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    All the client numbers are on my personal mobile phone as we've never been given company mobiles. I do all my day to day sales call on my mobile number, and have had that number for over 25 years.

    To the best of my knowledge there is no hard and fast line, but I'd say you are at risk of crossing it when you start marketing/promoting as a competitor, or if you deliberately stop adding value in your current role

    Yea, that's the way I see it too.
     
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    All the client numbers are on my personal mobile phone as we've never been given company mobiles. I do all my day to day sales call on my mobile number, and have had that number for over 25 years.
    Still a GDPR issue - they shouldn't be on your personal phone in the first place, using that data is certainly a breach. It just depends if anyone complains.
     
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    So I'm looking to leave and start my own business in January. Does anyone know if I rent an office tomorrow, furnish it, get my branding done, website created, everything ready for when I leave. If that is in breach of me being a Director as it would be a conflict of interest (companies house act 2006 section 175)?

    I've recently learnt that the MD has issued shares to his children. This was done at a meeting with the two other directors, without me present. Although I was at the office at the time. I would like to know how serious this is?

    In reality, a lot of businesses are formed by employees (sometimes directors) leaving one company to form a clone.

    There is always an element of poaching and some transfer of information.

    Just be smart about it.
     
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    Newchodge

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    So I'm looking to leave and start my own business in January. Does anyone know if I rent an office tomorrow, furnish it, get my branding done, website created, everything ready for when I leave. If that is in breach of me being a Director as it would be a conflict of interest (companies house act 2006 section 175)?

    I've recently learnt that the MD has issued shares to his children. This was done at a meeting with the two other directors, without me present. Although I was at the office at the time. I would like to know how serious this is?
    As a Director you must act, at all times, in the intersts of your company. Doing anything to set up a competitor companY while you are a Director is dangerous. Resign your directorship first.
     
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    Beaniecheese

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    If it's a GDPR issue then the whole company has a big issue as everyone uses their own mobiles. The MD never financed business mobiles.

    So all the clients I've dealt with, I have their names, company names and telephone numbers on my mobile.

    Plus, LinkedIn is may main source for contacts which I have nearly 3,000 connections. Again, these are on my personal account. Which I have built up since LinkedIn started. Prior and since joining the company.

    Apart from that I will have no other info on clients.
     
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    Beaniecheese

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    As a Director you must act, at all times, in the intersts of your company. Doing anything to set up a competitor companY while you are a Director is dangerous. Resign your directorship first.
    Is this black and white, or a big grey area?

    What I mean by that is that I'm still dedicated to my job as a Director. However, I am planning to leave and set up my own business. Where does the line start and end?
     
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    Newchodge

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    Is this black and white, or a big grey area?

    What I mean by that is that I'm still dedicated to my job as a Director. However, I am planning to leave and set up my own business. Where does the line start and end?
    It isn't gray. Taking any action that is potentially detrimental to the company of which you are a Director is a breach. Thinking about things is not.
     
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    It isn't gray. Taking any action that is potentially detrimental to the company of which you are a Director is a breach. Thinking about things is not.

    It is grey - it's an interpretation

    Setting up a dormant company and renting an empty space isn't detrimental to the existing business business
     
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    If it's a GDPR issue then the whole company has a big issue as everyone uses their own mobiles. The MD never financed business mobiles.

    So all the clients I've dealt with, I have their names, company names and telephone numbers on my mobile.

    Plus, LinkedIn is may main source for contacts which I have nearly 3,000 connections. Again, these are on my personal account. Which I have built up since LinkedIn started. Prior and since joining the company.

    Apart from that I will have no other info on clients.
    As a director of the old company, you may be liable for some of the GDPR issues.

    As the director of the new company, you are certainly liable for any GDPR issues that you create by taking data that you know is not yours to take.

    "Under the Data Protection Act 2018, it is a criminal offense to knowingly or recklessly obtain or disclose personal data without the consent of the data controller. A similar provision existed under earlier legislation and led to the conviction of an employee for unlawfully taking the personal data of customers when moving to a competitor. Businesses invariably treat breaches of this nature very seriously as they may have duties to protect the information from misuse and to report to the regulator, depending on the circumstances."


    "Avoid conflicts of interest
    You must avoid situations where your loyalties might be divided. You should consider the positions and interests of your family, to avoid possible conflicts.

    You should tell other directors and members about any possible conflict of interest, and follow any process set out in the company’s articles of association.

    This duty continues to apply if you’re no longer a director. You must not take advantage of any property, information or opportunity you became aware of as a director."


    You can ignore all this, many people do, but you should be aware of the risks.
     
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    Beaniecheese

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    I'm a bit confused. Surely as a Director I have every right to resign and start up another company in competition! I see this happening all the time in business.

    I'm not leaving a failing business, it's doing very well. I just do not like the direction it is now going, or the fact that as a Director I have been left out of Directors meetings, when the other directors have issued shares to their family. As far as I can see issuing shares without the other directors being aware is a breach as well as failing to list absentee directors.

    I have considered stepping down as a Director now, to resign in January after I get dividends. However, I cannot imagine for one minute that me stepping down won't be anything but transparent that I clearly want to leave, and might complicate things even more.

    Regarding GDPR. Can I not simply message every contact and ask them if they want me to remove their details on my personal phone as I will be leaving the business?
     
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    You have every right to resign and start a new company.

    But you are talking about starting a new company, whilst working at the old company. You don't have the right to do that.

    He is the MD and majority shareholder, he has enough shares to do pretty much whatever he wants. He has no need to notify you as a director or invite you to all meetings. If you were in the meeting, what difference would it have made?

    You can resign at any point, what happens after that will depend on your contract. They can choose not to issue dividends this year.

    Regarding GDPR, that would be a breach of the rules - or rather every message you send would be a separate breach. You have no legal right to the data.
     
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    I'm a bit confused. Surely as a Director I have every right to resign and start up another company in competition! I see this happening all the time in business.

    I'm not leaving a failing business, it's doing very well. I just do not like the direction it is now going, or the fact that as a Director I have been left out of Directors meetings, when the other directors have issued shares to their family. As far as I can see issuing shares without the other directors being aware is a breach as well as failing to list absentee directors.

    I have considered stepping down as a Director now, to resign in January after I get dividends. However, I cannot imagine for one minute that me stepping down won't be anything but transparent that I clearly want to leave, and might complicate things even more.

    Regarding GDPR. Can I not simply message every contact and ask them if they want me to remove their details on my personal phone as I will be leaving the business?
    I don't think anyone is questioning your right to resign - you most definitely have that.

    What is under question is your conduct whilst still a director - which mustn' t be detrimental to the shareholders.

    Your right to start a business might be covered under a sharehlder agreement or a contract of service.

    Use of data and IP is questionable.

    However starting alone needs a bit of 'mental agility' and perhaps a few risks. You can be sure they will use a few tricks of their own to block you
     
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    MBE2017

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    Seems my worst fears are beginning to come true.

    OP, if you truly wish to leave and start up in competition, then do it. You can rent an office, start a company etc within a day. Do it the day you are officially free from your old job, you can plan what to do etc beforehand but just don’t action or discuss anything with anyone in the meantime.

    Personally I would advise not contacting ANY of the clients, simply email them, thank them for the business and relationship in the past, and state you have left to set your own company up.

    Don’t state what you are doing, IF they choose to call you then fine, try to take them. Your other contacts I would leave them alone for six months minimum unless you have agreed too something else.

    This will, at least at first, seem to make your start up harder, personally I think it will help. Those business contacts will now be judging you on your actions, and how you act now will determine the ethos and ethics you and your company work by.

    There must be other companies out there too approach, go after them hard, re visit the existing people after a suitable period. I have had to do this in the past and it worked well for myself. My top contacts all rang to inquire what was happening and to see if I could be of use too them. Doing things this way gives both you and your clients clear consciences.
     
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    Beaniecheese

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    But you are talking about starting a new company, whilst working at the old company. You don't have the right to do that.
    I'm now looking at resigning on 31st Dec. We start renting the be office in 1st Jan. Assist from buying a few bits, nothing will have been started prior to me resigning.
    He is the MD and majority shareholder, he has enough shares to do pretty much whatever he wants. He has no need to notify you as a director or invite you to all meetings. If you were in the meeting, what difference would it have made?
    Failure to record absentee directors from a directors meeting is in breach of Companies Act 2006 section 355.

    I read somewhere about failure to notify directors of shares being issued is a breach. But cannot find it.


    Regarding GDPR, that would be a breach of the rules - or rather every message you send would be a separate breach. You have no legal right to the data.
    I've read that I can inform all suppliers and clients of the chances prior to leaving.
     
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    Beaniecheese

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    What makes you think that they didnt record that you were absent. What would you have achieved by being there?
    It's not been recorded in the minutes.
    I would have been aware and suggested that the other shareholders (staff) would not be happy, and neither would I. We've always been told that we would get the company, as his children have no interest.
     
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    There are only 5 staff members in total, how many are directors?

    People change their minds, perhaps his children see the potential. As you're leaving and trying to steal the customers, why would they care what you think?

    I'm now looking at resigning on 31st Dec.
    Great, that gives you time to sort out the GDPR issues and make sure that no client data is stored on any staff members personal devices, especially yours.

    You have told the other directors about the GDPR issue, as you are required to as a director, right?

    I've read that I can inform all suppliers and clients of the chances prior to leaving.

    You read that you can inform them you're leaving? Or you've read you can inform them that you're leaving and setting up in competition?

    You certainly can't do the latter, and you can only tell them you're leaving with the MD's permission.

    They are the company's suppliers and clients, not yours.


    You said at the beginning that you and a colleague will leave and set up in competition.

    Have you thought about what you'll do when your colleague is offered your job and decides not to leave?
     
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    MBE2017

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    They are the company's suppliers and clients, not yours.


    You said at the beginning that you and a colleague will leave and set up in competition.

    Have you thought about what you'll do when your colleague is offered your job and decides not to leave?

    This is the pertinent point and why leaving correctly matters so much. I can’t speak for everyone, but I have NEVER swapped a supplier based on someone leaving, where they approached myself within six months.

    Most importantly YOU need to realise business is hard, just because you ring old customers and offer a better price does not mean they will change. If as you have stated you have grown the company through your efforts, go and do it for yourself.
     
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    Beaniecheese

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    This is the pertinent point and why leaving correctly matters so much. I can’t speak for everyone, but I have NEVER swapped a supplier based on someone leaving, where they approached myself within six months.
    You would if that supplier cannot give you the same level of service as what the person who left could give you. Regarding your second point about cost. Not everything is about bottom line, certainly not in our case.
     
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    You're presuming we all do the same job!? That is not the case. My colleague wants this as badly as I do and we compliment each other.

    Could your colleague learn to do your job?

    Even if your jobs are opposites, have you considered what will happen if they don't leave?

    People saying that they are going to leave and people actually leaving are not the same thing. They'll have a nice Christmas break to think about where the next pay cheque is coming from and what will happen to them and their family if it all goes wrong.
     
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    You would if that supplier cannot give you the same level of service as what the person who left could give you. Regarding your second point about cost. Not everything is about bottom line, certainly not in our case.

    Firstly you can't give the same service at your new company v the old company.

    You have less staff and fewer resources for one thing. Secondly, the old company has been around for a long time, brand new companies tend to fail. Moving to you is a risk.

    Like most people, I'd keep using the old company or move to one of their competitors, rather than the new company.

    If costs aren't an issue, why is the old company not more profitable? It turns over £100k per employee and makes a total of £100k profit.

    This suggests that costs matter, a lot.
     
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    OK, let's go through the issues here one at a time -

    GDPR - Personal mobiles for numbers is a big no-no. But it is not a big issue and easily rectified, but should not have happened. Leave that rectification to the new manager, whoever that might be. But take the numbers, etc. off your phone and (with their permission!) enter them into a registered database if the info goes beyond company data and inc. personal info.

    LinkedIn - your personal affair. The company should have created its own LinkedIn account - if the MD was too daft to do that, that's his lookout! As we say in German "Dummheit muss bestraft werden!" (Stupidity must be punished!)

    Customer lists - contact all possible customers 'officially' by letter or telephone call using their publically accessible numbers, stating that you are a new company. That way, you are not using company property (information gathered about customers on behalf of the company). You cannot contact existing clients on behalf of your new company whilst working for the old company. Wait until Jan 1st.

    Value of old company - Zero. Or at best the firesale value of any physical assets. Companies are made of people. Any assets such as buildings and machinery are purchased to aid those people and help them to turn a profit. If what you have written is a true representation of the facts (ALWAYS A BIG IF RIGHT THERE!) then you and your colleagues are the company. A company of, say, one hundred people must have systems and structure and momentum and market share that makes it worth something - but five? And £100k profit? It would cost that to buy and run the thing!

    Tip - if you leave, be as friendly and amicable to all parties as possible and tell customers that you and the old company part as friends. i.e. leave any bad-mouthing to others.

    P.S. Good Luck - whatever you decide to do!
     
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    Beaniecheese

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    Firstly you can't give the same service at your new company v the old company.
    Good point, and I completely agree. When we leave, the level of service at the new company will be the same as what they received previously. Whereas, the old company will not be at the same level as it was previously. Even if they employ new personnel (which would be extremely difficult given the complex nature of our business and the broad skills we have).
    Could your colleague learn to do your job?
    Possibly, anyone could. But they would have to spend 30 years in branding, and sales and marketing first.
    Even if your jobs are opposites, have you considered what will happen if they don't leave?
    Yes, which won't happen seeing as they are selling their house to help fund the business. However, worst case scenario it takes me a bit longer.
    If costs aren't an issue, why is the old company not more profitable? It turns over £100k per employee and makes a total of £100k profit.
    Because it's not ran nearly as well as what it should be.
     
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    enter them into a registered database if the info goes beyond company data and inc. personal info.
    Just to clarify, this database belongs to the old company, not you. You cannot take/keep a copy of this database.

    Good point, and I completely agree. When we leave, the level of service at the new company will be the same as what they received previously.
    So the other employees provide no value at all to the old company? The assets and IP also provide no value at all?

    Yes, which won't happen seeing as they are selling their house to help fund the business. However, worst case scenario it takes me a bit longer.

    Selling or sold? Plenty of time to change their mind.

    Because it's not ran nearly as well as what it should be.
    You've been there for several years and you're a director. Why weren't the issues sorted?

    Out of interest, what does the company actually do?
     
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    MBE2017

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    You would if that supplier cannot give you the same level of service as what the person who left could give you. Regarding your second point about cost. Not everything is about bottom line, certainly not in our case.

    Nope, you are wrong, at least where I am concerned. I use people I like and trust and who act correctly, but I am an awkward guy.

    Most would not be bothered, but don’t under estimate the obstacles to overcome as a new company, you have no proven level of service, if service is so important why risk moving to an unknown entity over a long standing supplier?

    I wish you well, but business is never as easy as it first appears. When you sell quality you wish you are more competitive to get those orders given to lower cost suppliers, when you sell cheaper you wish you could get those quality clients who pay more, but never can because you do not have the same quality.

    Business needs all types of suppliers and clients.
     
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    Just to clarify, this database belongs to the old company, not you. You cannot take/keep a copy of this database.
    I should have clarified - NEW data gathered on behalf of your NEW company should not be on a personal mobile. What the old company does is their lookout. They will have the details of customers, assuming that they invoiced them. If they want to continue to contravene GDPR legislation, that's their affair.

    GDPR applies to personal information and is there to protect the privacy of the individual and not a company or business.
     
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    Beaniecheese

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    GDPR - Personal mobiles for numbers is a big no-no. But it is not a big issue and easily rectified, but should not have happened. Leave that rectification to the new manager, whoever that might be. But take the numbers, etc. off your phone and (with their permission!) enter them into a registered database if the info goes beyond company data and inc. personal info.
    The MD was too tight to pay for mobiles. The telephone system we had in place was terrible, which forced us to use our own personal mobiles. There will not be a manager in place of anything like that under the MD's watch as he does not care about policies of any kind. This is something my colleague and I have tried to do on several occasions only for it to be ignored.

    Could you expand on the second part about removing the numbers from our mobiles and enter them into a registered database with their permission?

    LinkedIn - your personal affair. The company should have created its own LinkedIn account - if the MD was too daft to do that, that's his lookout! As we say in German "Dummheit muss bestraft werden!" (Stupidity must be punished!)
    I have always been very active on LinkedIn, so when I started to promote the business I automatically got traction to my account, and this was before the company account was created. Company accounts were never that successful on LinkedIn in comparison to personal accounts, so we kept it that way.
    Customer lists - contact all possible customers 'officially' by letter or telephone call using their publically accessible numbers, stating that you are a new company. That way, you are not using company property (information gathered about customers on behalf of the company). You cannot contact existing clients on behalf of your new company whilst working for the old company. Wait until Jan 1st.
    I don't have a customer list, only my phone, linkedin and what I have in my brain.
    Can I not contact them even if I do not promote the fact that I will be setting up a rival company?
    Value of old company - Zero. Or at best the firesale value of any physical assets. Companies are made of people. Any assets such as buildings and machinery are purchased to aid those people and help them to turn a profit. If what you have written is a true representation of the facts (ALWAYS A BIG IF RIGHT THERE!) then you and your colleagues are the company. A company of, say, one hundred people must have systems and structure and momentum and market share that makes it worth something - but five? And £100k profit? It would cost that to buy and run the thing!
    I agree. If he ever came back with a MBO I would expect it at firesale value. However, I'm simply not interested anymore in a MBO. I'd rather start a fresh and do what I know I can do along with a very skilled colleague.
    Tip - if you leave, be as friendly and amicable to all parties as possible and tell customers that you and the old company part as friends. i.e. leave any bad-mouthing to others.
    Always. I do not burn bridges, never have, I have full respect for anyone who runs a business. Although every place I have left as an employee has collapsed within a year of me leaving.
    P.S. Good Luck - whatever you decide to do!
    Thank you very much. I really appreciate your unbiased and un-presuming (if that is a word) opinion.
     
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    Beaniecheese

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    Nope, you are wrong, at least where I am concerned. I use people I like and trust and who act correctly, but I am an awkward guy.
    So you use people you like and trust. In that case if you were my client, that would be me. You would never have dealt with anyone else in the company. And if you are using the company because we understand branding, then you would not use them any more after I have gone. As they will not have that person. You would go back to the person who gave you that trust in your brand.
     
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    This is the pertinent point and why leaving correctly matters so much. I can’t speak for everyone, but I have NEVER swapped a supplier based on someone leaving, where they approached myself within six months.

    Most importantly YOU need to realise business is hard, just because you ring old customers and offer a better price does not mean they will change. If as you have stated you have grown the company through your efforts, go and do it for yourself.

    Whilst my 2 businesses were both based entirely on bringing existing clients with me.

    In fact the first was based on a suggestion by a client that I set up on my own - and bankrolling it.
     
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    @Beaniecheese I suspect you are somewhat over-thinking, and/or being side-tracked by some of the commentary on here.

    You evidently have the ability to run and grow a business as an employed director.

    The huge difference you will encounter as an owner director revolves around decisions and responsibility.

    Make decisions
    Act on those decisions
    Take responsibility for the outcome.

    Have a marketing strategy; which includes poaching a portion f your existing customers. (and acknowledges some won't come with you)

    be prepared for a backlash from the existing business.

    But ultimately either do it, or accept that you will remain an employee director
     
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    The MD was too tight to pay for mobiles.
    I always believe in giving people the best tools available for the job. You should see pianists' faces beam when they sit down at a classical grand piano - and how they grimace when forced to pay some digital grot-box! And a good piano costs about £120,000 - we are talking about a basic Motorola smartphone for £70 here. Hardly a major cost!
    Could you expand on the second part about removing the numbers from our mobiles and enter them into a registered database with their permission?
    AFTER you have left and are no longer a director.
    Company accounts were never that successful on LinkedIn in comparison to personal accounts, so we kept it that way.

    I don't have a customer list, only my phone, linkedin and what I have in my brain.
    Your LinkedIn account and what you have between your ears are your affair. The Old Co could argue (if it came to litigation) that you were stealing company information (customer lists) so you must base any New Co activity on those two properties.
    Can I not contact them even if I do not promote the fact that I will be setting up a rival company?
    Until you have left Old Co, you are a director and employee and must therefore act on behalf of Old Co. Once you are with New Co, get busy!

    Make decisions
    Act on those decisions
    Take responsibility for the outcome.
    This!
    Have a marketing strategy; which includes poaching a portion f your existing customers. (and acknowledges some won't come with you)

    be prepared for a backlash from the existing business.
    Hence my 30 cents worth is to be careful about what information you can and cannot use after Jan.1st.

    When Old Co sees clients leaving, they are going to get dead shirty!
     
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    Beaniecheese

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    Whilst my 2 businesses were both based entirely on bringing existing clients with me.

    In fact the first was based on a suggestion by a client that I set up on my own - and bankrolling it.
    Whilst I've not had any clients asking me directly to set-up on my own, we have lost the respect and projects from clients (worth well over £100k) directly because of the MD's attitude and his closed mindedness.

    Can I ask if you cared about taking client information with you? And how did you go about it?
     
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    Whilst I've not had any clients asking me directly to set-up on my own, we have lost the respect and projects from clients (worth well over £100k) directly because of the MD's attitude and his closed mindedness.

    Can I ask if you cared about taking client information with you? And how did you go about it?
    It was pre GDPR.

    and no, I didn't care, but there was inevitable backlash - which I handled.

    A small irony the second time around was one (of several) areas of contention was ownership of data - the company had nothing in place to contractually own or protect customer data. I left with a USB stick containing all my customer data.

    I definitely not recommending that - but the choice is yours.
     
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    Beaniecheese

    Free Member
    Nov 9, 2022
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    It was pre GDPR.

    and no, I didn't care, but there was inevitable backlash - which I handled.

    A small irony the second time around was one (of several) areas of contention was ownership of data - the company had nothing in place to contractually own or protect customer data. I left with a USB stick containing all my customer data.

    I definitely not recommending that - but the choice is yours.
    There are only maybe 5 clients that I would need to contact, and similar for my colleague. We would not need to download a database, or even need to really keep their numbers on our mobiles. I'm pretty sure we could remember 5 names and just call the company up and ask to speak to them. With the fact that we have never let them down and managed everything, there would be no reason why they would not at least speak with us as we have a great relationship.
     
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