First time Director and Shareholder

[Crimmins]

Hi all,

Fairly new to the forums.
I have recently been appointed director for a new fabrication/ manufacturing business.
This is an industry that I have a lot of experience in, both hands on and general management.

I have to admit, it is a little daunting. This will be the first time I have been a director/ shareholder. I was hoping to maybe get some advice based on your own experiences that will help me on this new venture.

Literally any and all advice/ suggestions are welcome

 

[DoolallyTap]

You should have a Directors Agreement in addition to your Contract of Employment. Are you investing capital, if so you should have a Shareholders Agreement. You can research agreements and what needs to be stated. Without being a shareholder being a director is just a fancy title and means nothing except you will have liabilities. New company? have you seen the projections.

 

[Newchodge]

How did you acquire the shares?

 

[Crimmins]

You should have a Directors Agreement in addition to your Contract of Employment. Are you investing capital, if so you should have a Shareholders Agreement. You can research agreements and what needs to be stated. Without being a shareholder being a director is just a fancy title and means nothing except you will have liabilities. New company? have you seen the projections.

Thanks for the response.

I don't currently have a separate directors agreement. Will certainly look into that. I have made an investment into the business and I do have a shareholders agreement. It is a new company, very new. I have had a look at the current projections and everything seems to be promising.

 

[Crimmins]

How did you acquire the shares?

Currently 4 shareholders including myself all invested capital.

 

[Newchodge]

Currently 4 shareholders including myself all invested capital.

Take the shareholders' agreement to a commercial solicitor and ask for their advice.

 

[brucegreig]

I'd say that the two things that are most likely to catch new directors unaware are:

- You can only take a dividend from profits that the company has built up and retained ("distributable reserves"). Broadly speaking, any other money you take out has to be paid as a salary, with PAYE deducted, NI paid, etc.

- If the company gets into difficulty, and cannot pay its debts as they fall due (becomes "insolvent"), and it continues to trade anyway hoping things get better ("trading whilst insolvent") then any debts the company incurs from that point become the personal responsibility of the directors if the company eventually fails, broadly speaking.

Even if the company goes bust, and has no money left, and dies, litigation funders might put up money to pay lawyers to chase you and take your house if it looks like you have taken an unlawful dividend, or allowed the company to incur further debts trading whilst insolvent.

 

[Crimmins]

I'd say that the two things that are most likely to catch new directors unaware are:

- You can only take a dividend from profits that the company has built up and retained ("distributable reserves"). Broadly speaking, any other money you take out has to be paid as a salary, with PAYE deducted, NI paid, etc.

- If the company gets into difficulty, and cannot pay its debts as they fall due (becomes "insolvent"), and it continues to trade anyway hoping things get better ("trading whilst insolvent") then any debts the company incurs from that point become the personal responsibility of the directors if the company eventually fails, broadly speaking.

Even if the company goes bust, and has no money left, and dies, litigation funders might put up money to pay lawyers to chase you and take your house if it looks like you have taken an unlawful dividend, or allowed the company to incur further debts trading whilst insolvent.

Thank you for your reply, this is very helpful

 

[fisicx]

Have good read of this:

Being a company director

Understanding your role as director of a limited company and your responsibilities to Companies House.

www.gov.uk

At a very basic level:

Directors get nothing. Not a single penny (but can draw a directors loan and get expenses).

Shareholders get dividends. Usually paid annually and need to be declared on your tax return.

Employees get wages. Tax and NI is deducted at source.