New Limited Company

[lemsip100]

Hi All

I am in negotations with my current employer who wants to set up a new limited company with me and two others. He is offering 15 shares to me at £1 and 5 each to the other two parties (presumably at £5 each). He is also making me a director. What do I need to do now? I know for the shares he is going to want me to increase my working hours for no overtime and be available for the company more than ever. I am worried that as he is the majority share holder and MD I could be making an investment with my time and reap no reward.

Any help appreciated
lemsip100

 

[Babylon]

For starters, you should ask him to give you copies of the shareholders agreement and directors' service contract.

If you get a bad vibe then you should make sure that everything is agreed in writing or should walk away from the venture.

Best wishes,

 

[fastfences]

Yeah, it's tough at the top.
You may be expected to work 80 hours a week to see the company exceed. Whilst we all acknowledge that level of contribution is required, we also need to know there's something at the end of the rainbow. There should be specific shareholder's/director's terms in which you're advised of benefits package. Certainly, remuneration should reflect both the personal input and company success. Get it all in writing!
Cheers, Nigel

 

[earner]

Just for clarification, is he dispensing with your services then asking you to invest in his new company to do the same job but with shares/as a director?

Bit of a cheeky sod really.

And yes, as a Director you will be working 25/8. . . but you can always sell your shares back to him .. that £15 will go a long way.

How many shares are there? 1000?

I still think he's a cheeky git, unless you update us with further details that show he isn't.

 

[bwglaw]

Without full facts;

Is he avoiding redundancies...?

Is the employer at all appointing you as Directors or just giving you shares as rewards as an employee (if business transferred) or are you just merely a shareholder?

Is the employer attempting to appoint you as Directors to try and remove any employment rights?

Willl the current employer's business be transferred to the enw Limited Company, along with any assets?

What is the business really worth, if anything?

Having sight of a shareholders agreement and Director Service Contract is a good start along with a written proposal on how he envisage your involvement within the company structure

 

[earner]

I've been "made redundant" - with no redundancy of course - from a few firms yet then continued to do my job working from home as a freelancer.

So it saves them money but they still get the job done.

These are usually failing companies, but it has still happened to me a lot.

Last time was just 2 months ago.

But that is better than the company I worked for "freelance" last year, where he offered me an amount for certain tasks, a posh title and a share of the growth of the company, worked me solidly for 60-70 hours then never paid me after even 4 months.

 

[lemsip100]

Thanks for the input!

Both businesses are sound, I am not worried about any change of employent and I will still be on salary.

My concern is of any disagreement and possible fallout in the future should we have a good business. He will have a 75% majority, with this control I'm sure he could "master" a way for the minority to "get nothing" (worst case scenario).

I am guessing this is where the shareholders agreement and directors' service contract comes in. How do I get one - does anyone have examples or is it up to him to produce this? Can i enforce we have one?

Lemsip100

 

[bwglaw]

I am guessing this is where the shareholders agreement and directors' service contract comes in. How do I get one - does anyone have examples or is it up to him to produce this? Can i enforce we have one?

Lemsip100

Examples are nothing to go by because they all differ. It is up to him to produce one. You cannot enforce but insist that there is one otherwise your rights will mean virtually nothing in the future

Jonathan

 

[Kent Accountant]

Shareholders Agreements/Directors Service Contracts are not inexpensive and you hope that will be a total waste of money i.e. after they have been prepared they will sit in a drawer and never see the light of day again. However, if there is a fallout and they are not in that drawer, them you will regret it because at that stage the relationship will have broken down and the legal costs that you will then incur will make the costs of the agreements seem cheap