Opportunity of Business Shares / Prospects

Discussion in 'General Business Forum' started by gavlar, Sep 5, 2019.

  1. gavlar

    gavlar UKBF Newcomer Free Member

    2 0
    Hi, I would appreciate a little advice... I'll try keep this brief.

    I currently work in a niche construction industry where I have been asked to join a relatively new company (only trading 1 year) to help them take the company up to the next step. There are already 2 directors with a 60% and 40% share between them - they are both more 'hands on' in terms of site based (installers/fixers) where as I am more office orientated (12 years experience commercial/technical background). The 40% shareholder is from a sports background and is only fairly new to the industry (3 years), although he put a lot of money upfront to get the business off the ground, initially.

    Their proposal to me is: match my current salary (£40k) for 6months and after that (providing they can see what I can offer the company in term of taking it up a level and we all get on amicably) offer me 10% shares in the company.

    I have seen their first trading year where they turned over £850k with £180k profit and more recently their new financial year from the last two months, they have turned over £500k with a £75k profit.

    I think I'm okay with the proposal (?), although I am just thinking that if I am potentially the one that is going to take the company up (in bigger turnover/profit), be able to offer more in terms of office skill-set and technical background... should I ask for more shares at staged intervals depending on how the company performance i.e. increased shares at year 2 or 3 to 20%...??

    Given the potentially profits, their not going to fully disperse of them as it would be unhealthy to do so for the company sake etc...

    Your thoughts or alternative proposals welcome & appreciated....
     
    Posted: Sep 5, 2019 By: gavlar Member since: Jan 18, 2014
    #1
  2. Gordon L

    Gordon L UKBF Newcomer Free Member

    21 2
    You can ask what you want.

    However, it won't be just you taking the company to the next level. Without them you are nothing, if you see what I mean. they are the ones who took the risk, and put the money up. Not you. If you are that good, why don't yous start up yourself? (rhetorical question)

    10% plus a salary in a company which on the face of it looks to be doing well, is exceptional. No one is irreplaceable, regardless of what you think of yourself. No risk, sound salary, 10% of company = pretty good deal on the face of it. Might be sensible to consider a cash bonus rather than extra shares, so if you get shafted on the shares front, you have got your hands on some cash. At the end f the day, everything is negotiable. You are asking a lot of two founders to demand 20% before you even have started. I wouldn't touch you if you asked me that.

    You'll need to get a lawyer to have a good look at the shareholder agreement.

    Your penultimate sentence makes no sense, by the way.
     
    Posted: Sep 5, 2019 By: Gordon L Member since: Jul 22, 2019
    #2
  3. Clinton

    Clinton UKBF Big Shot Free Member

    4,304 1,591
    This is a lot, lot more complicated than you think and if you do not go pay for proper, professional advice you're going to regret it later! I promise.

    You are so raw that you are a prime target for getting screwed over. Your post suggests you don't understand the difference between being a shareholder and being a director, for example, and the implications. So you could be a 10% shareholder but have no say in salary decisions or, for that matter, in dividend distribution!

    But that's just one of a number of issues here.

    Towards the latter end of the post you display a kind of greed that suggests you have no idea about commercial realities (despite working in an office for 12 years).

    Go. Pay. A. Lawyer.
     
    Posted: Sep 5, 2019 By: Clinton Member since: Jan 17, 2010
    #3
  4. Gordon L

    Gordon L UKBF Newcomer Free Member

    21 2
    well said.
     
    Posted: Sep 5, 2019 By: Gordon L Member since: Jul 22, 2019
    #4
  5. gavlar

    gavlar UKBF Newcomer Free Member

    2 0
    @Gordon L , @Clinton

    Thank you to you both! I have taken on board what you have both said.

    It is a big decision for me this... I've always worked for big companies where I've had job security and I am just trying to protect myself.

    In terms of commercial awareness I meant securing construction work and value engineering projects etc... I'm not necessarily business orientated and appreciate your advice.

    I have made an appointment to see a solicitior to go through my situation. I have also asked the two current founders/owners for their shareholders agreement and they haven't drawn one up yet themselves... seems a bit strange?

    @Gordon L in terms of my second to last sentence... what I meant, surely the company wouldn't completely share the profits out between us and leave nothing in the bank (so effectively, I wouldn't be getting 10% of the company's total profits). Wouldn't we have to have a board meeting to discuss how much dividends to be paid out (at the end of the year)?

    @Clinton with regards to your comment: "You are so raw that you are a prime target for getting screwed over. Your post suggests you don't understand the difference between being a shareholder and being a director, for example, and the implications. So you could be a 10% shareholder but have no say in salary decisions or, for that matter, in dividend distribution!"

    Are you suggesting since I'm the minority shareholder the bigger SH's can dictate what shares are paid out (and I wouldn't have a say)? I would appreciate if you could explain this a little more...

    Thanks again.
     
    Last edited: Sep 8, 2019
    Posted: Sep 8, 2019 By: gavlar Member since: Jan 18, 2014
    #5
  6. Clinton

    Clinton UKBF Big Shot Free Member

    4,304 1,591
    Shares aren't "paid out". Companies pay dividends, not shares.

    And shareholders don't decide what dividends to pay. Even if you are a 100% shareholder you don't have a say.

    But you can run all this via your solicitor.
     
    Posted: Sep 8, 2019 By: Clinton Member since: Jan 17, 2010
    #6
  7. Mr D

    Mr D UKBF Legend Free Member

    16,097 1,797
    Not drawing up a shareholders agreement isn't actually strange. Its way too common.
    Lots of people in business perhaps don't believe they need one. Until such time as they do and generally that is a time known as 'too late'.

    Directors can choose to share out just some of the profits. They may want to retain some for expansion, future opportunities etc. Or may decide not to pay out dividends at all.
    Directors run the day to day stuff, shareholders have limited powers.
     
    Posted: Sep 8, 2019 By: Mr D Member since: Feb 12, 2017
    #7
  8. MBE2017

    MBE2017 UKBF Ace Free Member

    1,005 266
    Definitely get professional advice, get everything in writing. If you want more shares you can hopefully negotiate a structured performance deal, based on increases and profitability down to your work, but as has been pointed out, no-one is irreplaceable.

    Follow Clinton’s advice, the forum is full of threads where people never got things in writing, believed what they were promised, and basically end up learning expensive lessons the hard way.

    Of course, you could also stay where you are and just take a salary.
     
    Posted: Sep 9, 2019 By: MBE2017 Member since: Feb 16, 2017
    #8
  9. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,885 979
    It's a new company and it's a big risk if your current job is pretty secure.

    I'd be wanting a premium salary to move, which I'd happily reduce to a more sensible level when the shares are issued.
     
    Posted: Sep 9, 2019 By: STDFR33 Member since: Aug 7, 2016
    #9
  10. Stas Lawicki

    Stas Lawicki UKBF Newcomer Free Member

    24 4
    On face value it could be a good opportunity. I don't know what the company really does, who the partners are or the market but you do and will have a feeling of whether it is going places or not. There are lots of people out there building businesses for others that never get shares. There are lots of people out there missing out on opportunities thinking bigger companies offer better job security.

    I would do what makes you happy. Is that money? A job with status? Shares? Non-work related hobbies than need funding? Family? What do you want to spend more time doing and how will taking this (or any other) job help you get that?

    Life is too short to overly think about this sort of thing. I've passed up lots of opportunities, some that have gone on to be really rather exciting, others that failed. I've worked for large PLCs, part of small family businesses and now run my own little business. If working for these people makes you happy and gives you fulfillment then get in there. What is the worst that could happen - you go back to that large company you mentioned with more experience and knowledge. It could a very exciting opportunity.

    For what it's worth - I wouldn't waste money on solicitors just yet. Wait until/if the share agreement ever comes through and then take advice. A whole lot can change in 6 days let alone 6 months.

    Good luck and let us know what you decide
     
    Posted: Sep 10, 2019 By: Stas Lawicki Member since: Nov 14, 2017
    #10