help !!!! Becoming director of a business

[crofty]

I have been working for my current boss for the past 3 years, i have been managing the general running of the company for the past 2 years i work alone and mail my boss the work i have done for invoicing as they live abroad. My boss has never done me any favours but recently she has asked for my wife and i to become directors of her company, she will have control of company accounts and in 12 months when she has taken 30,000 of gross profit the company will belong to us! i cant help wondering where the catch is. My wife thinks they are taking us for a ride and it would be stupid to become directors of a company when current owner will still have control of the accounts but i really want this and and have worked hard to keep the clients happy doing work from home for no extra pay. I can't help thinking i'm looking a gift horse in the mouth, or is it that she's trying to take me for a mug?........Help......:|

 

[Vending Siting Services]

Are you going to be issued with any shares?

 

[business123]

Firstly, as a director you won't own the company - you need to be a shareholder to 'own' the company.

 

[crofty]

no, the incentive is in the fact we will own the company after 12 months

 

[crofty]

so becoming a director wouldn't benefit me? but would benefit her?

 

[business123]

Being a director wouldn't benefit you unless you got a pay-rise! However as a director you would have certain responsibilities such as you would need to ensure you were not trading, for instance, insolvent or you could be liable for company/creditor debts etc.

 

[crofty]

My wife thinks that the company could be in trouble this is why she would want to make us directors, but i know how much work we I do i'm busy everyday so i cant see how it could be.

 

[business123]

I'd go to www.checksure.biz and order a full report on the company, check what the risk score is - this will give a good indication.

However this will only show up until the last accounts were for, ask the owner for up to date management accounts so you can see the current situation.

At the end of the day, there's no need for you to be directors, if you are going to own the company shares anyway if the £30K conditions are met.

 

[Indigo Cherry]

Hi mate, I used to work for a security company. After about two years I ended up running everything and the two owners basically sat back and counted the money that I was making them. I asked them for a percentage(which would have given me more incentive to get new contracts), but they told me where to go and that if i did not like it I could go elsewhere.
Within two days I got phonecalls from most of the contracts mangers that I liased with at other companies offering me the work, which I took and have not looked back since.
What is stopping you from doing the same????

I was thinking exactly the same! It sounds as though the OP doesn't have a good relationship with the current owner! Unless you have signed a contract to say you won't poach any of her customers, then get yourself a decent accountant, a decent solicitor, run it by them and go it alone (with your wife).

By you and your wife becoming a director in this company now can only benefit the owner! Unless she is willing to give you shares now, tell here where to stick it!

 

[crofty]

thanks she has already put in motion for us to take over she has asked for my wife's NI number mothers maiden name etc etc and is currently setting up an account at the bank , i feel i'm being railroaded into making a rash decision.
i like the job i do and would like to have it for my family i know that i'm not the the only person she has made this offer to, but everyone she has asked doesn't seem to be interested..

 

[crofty]

cheers for that this is exactly what my boss and her husband have done sat back and counted the money from their villa in france. My wife and i have spoke about taking the work for ourselves but my contact is like the ten commandments thou shall not accept gifts, poach work, speak to clients outside working hours etc. etc. most of the clients I have spoken to are quite happy to use my services and are not tied to her but I am by contract and can't touch them for 6 months after leaving it's so frustrating as they are mine for the taking but my contract has my hands tied.

 

[Indigo Cherry]

cheers for that this is exactly what my boss and her husband have done sat back and counted the money from their villa in france. My wife and i have spoke about taking the work for ourselves but my contact is like the ten commandments thou shall not accept gifts, poach work, speak to clients outside working hours etc. etc. most of the clients I have spoken to are quite happy to use my services and are not tied to her but I am by contract and can't touch them for 6 months after leaving it's so frustrating as they are mine for the taking but my contract has my hands tied.

See that's the problem! The contract! Have you had this contract professionally checked out to make sure it stands? I remember reading someting about this predicament before and they person wasn't allowed to approach the customer but the contract never said anything about her having to reject the customers if they approached her! She won! Get the contract looked at.

You say she has offered other pople this director's role? And they have turned it down? Surely that must tell you something!

There is a lot of what you have told us that just doesn't add up! Please don't sign anything!

 

[Indigo Cherry]

Has she said WHY she wants you as directors?

 

[crofty]

i make and fit vehicle graphics for different companies that all deal with me direct i am busy everyday. my wife has currently no role in the company

 

[crofty]

she wants to make us directors in preparation for taking over, she wants us to test the water.

 

[Indigo Cherry]

she wants to make us directors in preparation for taking over, she wants us to test the water.

And she also wants you to make her a substantial amount of Gross Profit while you are 'testing the water'

You have been running this company for her, what water do you need to test? By being made directors, you will receive no real benefit and you won't get any experience in running the business because you ALREADY do it

As far as I can see they ONLY benefit from you and your wife being directors for a year is the £30,000 (I think you said) that you will be earning HER!

Is she offering you a contract saying that she will hand over the business after 12 months? What's to stop you working your arses off for 12 months to earn her the money she wants and then he saying "ooops sorry, changed my mind"?

 

[crofty]

lines from my contract : the employee will not without the written consent of the company (such consent only to be withheld so far as may reasonably be necessary to protect the legitimate business interests of the company) during the employment or for a period of 6 months from the termination date whether alone or jointly with or as a shareholder, adviser, principal, partner, agent, director, employee, consultant or otherwise of the competing business, directly or indirectly:

solicit or canvass, or attempt to canvass, business from any applicant with whom the employee dealt in the twelve months prior to the termination date:

deal with or accept any instructions from any applicant with whom the employee dealt in the twelve months prior to the termination date:

solicit or canvass or attempt to solicit or canvass business from any client with whom the client dealt with in the twelve months prior to the termination date;

bla bla bla

 

[kulture]

You should ask her why she wants you to become a director? What is the advantage to her? All paranoid statements aside, a director of a limited company has limited liability. A director has certain duties and responsibilities and if you consider becoming a director you need to be assured that you can carry out these responsibilities. Not an easy task if she is doing the accounts abroad.

 

[crofty]

i know this but without the business i don't have a job, she has offered my wife work as i am working alone at the moment and its a struggle to keep everything balanced while i'm making graphics i cant fit and while i'm fitting i cant make she wants my wife to make so i can fit more.

 

[kulture]

On the one hand its great to hear of a business that is successful and growing. On the other, cynics will say that the owner is getting all the benefits of your hard work. This is undoubtedly true. If however you can agree a legally binding contract (with your solicitor's help) that commits her to GIVING you the business after a year, then you should consider it.

What no-one else seems to have said, is that one of the reasons that no-one else is interested in taking over the business is because YOU ARE THE BUSINESS.

 

[Indigo Cherry]

Got to agree with This And That on this one!

If the owner thinks the OP will do such an amazing job, then why offer the directorship to other people first?

It just stinks to high heaven to me!

 

[oldeagleeye]

The reason they want your wife on the firm is that at present she is not subject to the restrictions that you are. Making her a director would tie her hands too. Don't do it trust your wifes instinct.

At the moment then you wife could set up a company and poach those customers. I appreciate that your own contract phobits your being involved in any way for 6 months but even if you were the people in France would have to prove it. A bloody epensive excercise if they were in the UK but in France. They would be fools.

In any sort of civil litigation like this there is no legal aid for them so your talking at least £5,000 that they would have to slap on the table to start with. Then there is providing the proof and in a way that would be acceptable in court. A time consuming excercise even for an experienced P.I.

Frankly I can't see anyone prepared to gamble at least £10K on this sort of litigation when the compnsation wouldn't be worth it but especially when their own business would to all intents and purposes quickly become insolvant.

Personally I wouldn't waste a whole year working for these people if I were you especially if you mught end up with a bag of worms. That new bank account for instance sounds like they are getting ready for a bit of money laundering. That is the real risk

Makes going it alone now an even more viable and attractive proposition.

Rob

 

[Drpepper]

Agree with the "don't" and even more so if you do watch what you are signing - Directors guarantee's? It all sounds suspect to me.

 

[oldeagleeye]

Didn't spot the bit about wanting a directors guarantee. Definately a con dumping the company while they do a runner.

R

 

[thebigIAM]

No possible reason for her to want your wife as a director if she were genuine.

I agree 100% with Old Eagle Eye too.

 

[TotallySport]

The reason they want your wife on the firm is that at present she is not subject to the restrictions that you are. Making her a director would tie her hands too. Don't do it trust your wifes instinct.

At the moment then you wife could set up a company and poach those customers. I appreciate that your own contract phobits your being involved in any way for 6 months but even if you were the people in France would have to prove it. A bloody epensive excercise if they were in the UK but in France. They would be fools.

In any sort of civil litigation like this there is no legal aid for them so your talking at least £5,000 that they would have to slap on the table to start with. Then there is providing the proof and in a way that would be acceptable in court. A time consuming excercise even for an experienced P.I.

Frankly I can't see anyone prepared to gamble at least £10K on this sort of litigation when the compnsation wouldn't be worth it but especially when their own business would to all intents and purposes quickly become insolvant.

Personally I wouldn't waste a whole year working for these people if I were you especially if you mught end up with a bag of worms. That new bank account for instance sounds like they are getting ready for a bit of money laundering. That is the real risk

Makes going it alone now an even more viable and attractive proposition.

Rob

another agree, you might have the restrictions but your wife doesn't, get her to setup the business, and you do the work but lay very low

 

[A.McVitty]

It definitely sounds to me like its too good too good to be true. Personally, I have a feeling that as soon as the business is handed over to you and you own it, all manner of dodgy issues will come to light that you never even expected. Do your homework before hand and work out what the catch is because I have a strong suspicion there is one. The current owner has obviously thought about things and has some agenda in mind.

You have said that this is something you want very much. You have also said that you run the business and the current owner lives abroad. This tells me that if you left, there would be no business. You are the asset. If this is the case, then I would give some serious thought to setting up your own business instead. You will have all the contacts, the know-how to run it and you will not have to worry about the past coming back to haunt you. A new business comes with no baggage.

If you are certain that the offer is genuine (because we don't always want to be pessimistic) then seek some professional legal advice and plan the transition carefully, including (in bold letters) a clause whereby you have no liability for any problems which develop due to the current ownership or due to information that was kept from you.

 

[Jenni384]

Didn't spot the bit about wanting a directors guarantee. Definately a con dumping the company while they do a runner.

R

I've just read the whole thread and I agree with this.
It really does sound suspicious, and I wouldn't sign or agree to anything.

Crofty, don't let yourself be pressured into something I am 95% sure you would regret. And 100% sure you'd regret signing a director's personal guarantee - don't do it!

 

[Alan R Price]

I know it all sounds too good to be true however you could miss out on a good opportunity. It would cost you money in professional fees but it might be worthwhile to go through a "due diligence" process:

1. You need to ask for copies of the last three sets of full accounts (i.e. those which were submitted to HMRC).

2. You need to see management accounts for the period since the last accounts were drawn up.

3. Ask for cash flow and profit and loss forecasts for the next 12 months. All good businesses have these.

4. Get an accountant to examine the above documents and ask for access to the company's current records so that they can be verified.

5. Ask the directors for details of any legal actions or disputes in which the company might be involved and any other information which might affect the company's business now or in the future.

6. Find out if the company has given its bank a debenture (charge) over its assets.

If they can't or are not prepared to provide this information, don't proceed. If they say "Don't you trust us?" tell them it's not a matter of trust but standard business practice.

If you decide to proceed you should have a formal legal director/shareholder agreement drawn up by your own solicitor, containing safeguards against misrepresentation or omissions by the current directors.