Limited Company Share Woes
Discussion
(Posting Under Alias)
Sorry for the long read if you go via the spoiler.
I am a 10% shareholder in a company along side a 80% shareholder and another 10% shareholder.
All three of us are directors, all as different share classes (A,B,C)
The 80% shareholder is the MD.
The MD lives abroad, He communicates by email and "advises" the 'working' directors on how they should run the business to "earn his keep". He will retire at some point in the next 5 years and plans to sell the company shares to the remaining two directors.
The plan has been that the two remaining directors can continue to run the business in the future on a 50/50 basis, which so long as we purchase shares at the same rate as the other director, all is good, and so far it has been.
The MD and the other director that I work with are related. As such there is another line of communication in addition to the standard business communication to which I am not privy.
Apart from the other director and I, there are no other employees.
The other director does the books and another none-skilled task. He is not very "computer savvy", in an environment where it really is required. He _just_ gets by, because I am there.
I am a computer nerd, so I wrote/developed the internal day to day systems, support customers on purchases, as well as last year developing another platform which has increased the company net profit by almost 20% the following year and reduced our workload by over 200% which sounds great, obviously..!
Anyway, because I am technical I get asked by the other directors to fix things.
I was recently asked to fix the other directors laptop, his personal one, as a favour. No problem! We get on obviously, we have worked together for many years.
Unfortunately after fixing the laptop curiosity got the better of me, and I identified the other line of communication.
What I came across concerned me: They are discussing ways of getting rid of me and giving me as little as possible.
The MD has suggested that he wants us both to purchase shares over the next few years, which I already know. However there is a side note which mentions that they need to ensure that my shareholding does not become too great.
The MD plans to introduce more shares into the company in 5 years from now (When he retires?) which will dilute my shares.
He wants to still allow me to buy shares within that time because its [Quote]:"Cash in my pocket", and informs the other (related) director not to worry because:
They intend to put me in the position where I can choose to continue to work for a salary and "a minimal 5% or so!" of the company after the share dilution, which means they will have 95% of the profits between them.
It also mentions that if I do decide to leave and should I expect a dividend as a shareholder, they will just dilute the shares further by introducing even more to leave me with the smallest value of shares possible.
Worst case, they will dissolve and re start.
This is not new, the MD has previously dissolved and restarted this company. It was to get rid of his first startup business partner, which again is documented in the emails, but I was fed an entirely different story.
He mentions to the other director that it is imperative for him to learn everything that I do, in case I do decide to leave, and that he has 5 years to do it.
This is something that he is completely and utterly incapable of doing on any level given any level of training and an infinite amount of time.
The reason for all this occurring is because they think that they can do without me since the implementation of the new system I created.
The profits keep rising now due to it... And I think greed is kicking in and they want me out. Especially now that less work needs to be done.
I have dug my own grave, and if not for me stumbling upon this information I would be filling the grave in for them, at my own expense by purchasing shares only for them to be diluted.
Looking back the last couple of weeks I have noticed the other director asking more technical questions. Its just a shame that he wont ever "get it" as it were.. And that is the flaw in their plan.
As you can imagine, I am rather angered by the situation. The fact that they are stringing me along, with an intention to take my money through share purchases, then screw me over by diluting them, and then have the balls to tell me that I can still work there on a lower percentage whilst cashing in hugely on what I developed and invested in?!?!
Fair enough I implemented the system for the company but unfortunately what they plan on doing is not in my opinion ethical, or fair, but perhaps not /strictly/ illegal.
So far I dont see any positive outcomes for myself - and feel like I have completely wasted my time here, And other than placing a well placed accidental "bug" within the software and leaving, what are my options?
Knowing that I am going to be screwed over in a couple of years, Part of me wants to stay on the gravy train, and watch these two scumbags de-rail in front of me when they realise nothing works anymore and I leave for greener pastures.
With my salary and 10% dividend I am earning well above what I could get elsewhere right now. Which does influence my decision to stay, but I guess that is why they want me to leave!
I haven't revealed my hand, as I am unsure what to do myself yet.
Business Partners trying to find a way to get rid of me, but they dont know I know.
TL;DR: I have 5 years to get a new job, what would you do?
Sorry for the long read if you go via the spoiler.
I am a 10% shareholder in a company along side a 80% shareholder and another 10% shareholder.
All three of us are directors, all as different share classes (A,B,C)
The 80% shareholder is the MD.
The MD lives abroad, He communicates by email and "advises" the 'working' directors on how they should run the business to "earn his keep". He will retire at some point in the next 5 years and plans to sell the company shares to the remaining two directors.
The plan has been that the two remaining directors can continue to run the business in the future on a 50/50 basis, which so long as we purchase shares at the same rate as the other director, all is good, and so far it has been.
The MD and the other director that I work with are related. As such there is another line of communication in addition to the standard business communication to which I am not privy.
Apart from the other director and I, there are no other employees.
The other director does the books and another none-skilled task. He is not very "computer savvy", in an environment where it really is required. He _just_ gets by, because I am there.
I am a computer nerd, so I wrote/developed the internal day to day systems, support customers on purchases, as well as last year developing another platform which has increased the company net profit by almost 20% the following year and reduced our workload by over 200% which sounds great, obviously..!
Anyway, because I am technical I get asked by the other directors to fix things.
I was recently asked to fix the other directors laptop, his personal one, as a favour. No problem! We get on obviously, we have worked together for many years.
Unfortunately after fixing the laptop curiosity got the better of me, and I identified the other line of communication.
What I came across concerned me: They are discussing ways of getting rid of me and giving me as little as possible.
The MD has suggested that he wants us both to purchase shares over the next few years, which I already know. However there is a side note which mentions that they need to ensure that my shareholding does not become too great.
The MD plans to introduce more shares into the company in 5 years from now (When he retires?) which will dilute my shares.
He wants to still allow me to buy shares within that time because its [Quote]:"Cash in my pocket", and informs the other (related) director not to worry because:
They intend to put me in the position where I can choose to continue to work for a salary and "a minimal 5% or so!" of the company after the share dilution, which means they will have 95% of the profits between them.
It also mentions that if I do decide to leave and should I expect a dividend as a shareholder, they will just dilute the shares further by introducing even more to leave me with the smallest value of shares possible.
Worst case, they will dissolve and re start.
This is not new, the MD has previously dissolved and restarted this company. It was to get rid of his first startup business partner, which again is documented in the emails, but I was fed an entirely different story.
He mentions to the other director that it is imperative for him to learn everything that I do, in case I do decide to leave, and that he has 5 years to do it.
This is something that he is completely and utterly incapable of doing on any level given any level of training and an infinite amount of time.
The reason for all this occurring is because they think that they can do without me since the implementation of the new system I created.
The profits keep rising now due to it... And I think greed is kicking in and they want me out. Especially now that less work needs to be done.
I have dug my own grave, and if not for me stumbling upon this information I would be filling the grave in for them, at my own expense by purchasing shares only for them to be diluted.
Looking back the last couple of weeks I have noticed the other director asking more technical questions. Its just a shame that he wont ever "get it" as it were.. And that is the flaw in their plan.
As you can imagine, I am rather angered by the situation. The fact that they are stringing me along, with an intention to take my money through share purchases, then screw me over by diluting them, and then have the balls to tell me that I can still work there on a lower percentage whilst cashing in hugely on what I developed and invested in?!?!
Fair enough I implemented the system for the company but unfortunately what they plan on doing is not in my opinion ethical, or fair, but perhaps not /strictly/ illegal.
So far I dont see any positive outcomes for myself - and feel like I have completely wasted my time here, And other than placing a well placed accidental "bug" within the software and leaving, what are my options?
Knowing that I am going to be screwed over in a couple of years, Part of me wants to stay on the gravy train, and watch these two scumbags de-rail in front of me when they realise nothing works anymore and I leave for greener pastures.
With my salary and 10% dividend I am earning well above what I could get elsewhere right now. Which does influence my decision to stay, but I guess that is why they want me to leave!
I haven't revealed my hand, as I am unsure what to do myself yet.
Business Partners trying to find a way to get rid of me, but they dont know I know.
TL;DR: I have 5 years to get a new job, what would you do?
Edited by smithydd on Monday 18th July 12:00
Have a google about the unfair treatment of minority shareholders - you do have some statutory protection in this regard
http://www.ashfords.co.uk/guide-to-unfair-prejudic...
It may be that you need to keep this as a negotiating point for later discussions, but don't jump in all guns blazing yet.
Also don't disclose that you've read the document - certainly not in writing.
http://www.ashfords.co.uk/guide-to-unfair-prejudic...
It may be that you need to keep this as a negotiating point for later discussions, but don't jump in all guns blazing yet.
Also don't disclose that you've read the document - certainly not in writing.
Wow, this is just heartbreaking to read. I went through a similar thing last year but I wasn't as deeply invested as you. Our circumstances are almost identical though, I was in businesss with a 33.3% shareholding alongside two other 33.3% shareholders who were both related to each other. Just like you, I was the technical brains of the outfit and I spent almost a year working for £787 per month salary (no dividends) to build the systems and processes for the business to succeed. The instant the money started to flow in (and by god did it flow!) they took their opporunity to get rid of me for a total pitance making sure to legally lock up and lay claim to all the systems and IP that I developed.
In the end my lawyers bill was over 50% of my settlement and the process froze me out of working for almost 6 months. In total, I gave up about 1.5 years of my life, set up two people to be very successful and in that time I took home less than £20,000 for all my work and efforts.
I'm not sure how I can help you to be honest, other than to offer my sympathy. From speaking to the lawyers, it amazed me just how little I had in the way of rights or options. You might have more cards to play if you have been employed by the company for more than 2 years but I was basically on a hiding to nothing. All my work, all my innovations, everything I had done belonged to the Company and as a minority shareholder I had no power, control, or influence in said company.
I know we can never say never, but I honestly can't imagine a situation where I would ever be a minority shareholder again. People are greedy and both my business partners seemed like the most trustworthy people going and I regarded them as friends.
It sounds like you are making great money. My advice would be to stop investing in the company (both financially and technically) and simply operate the businesses 'as is' making good money for as long as you can get away with it. Save up as much of your wages as possible so that you have a pot to see you through when it does eventually blow up. It will be hard knowing they are going to screw you but, ultimately, the longer you tred water on a great wage the more you are screwing them back. If they ask why you aren't so committed, innovative, etc just make up some trouble at home that has you distracted.
Finally, don't go looking to harm or derail the business. It will only bite you in the ass. That's what I reaslised from my process, the business is a legal entity and it has done you no harm. As an employ and director, you have a duty of care to look after it and do it no harm. What will kill you is knowing that anything you do that's good for the business is ultimatley good for the other two and not you - that's the kick in the nuts. However, from a legal stand point, if you harm the business you open up a whole can of worms and make it very easy for the other two to get rid of you cheaply. That's why I say reign in your 'skill and innovation' and go through the motions month to month.
In the end my lawyers bill was over 50% of my settlement and the process froze me out of working for almost 6 months. In total, I gave up about 1.5 years of my life, set up two people to be very successful and in that time I took home less than £20,000 for all my work and efforts.
I'm not sure how I can help you to be honest, other than to offer my sympathy. From speaking to the lawyers, it amazed me just how little I had in the way of rights or options. You might have more cards to play if you have been employed by the company for more than 2 years but I was basically on a hiding to nothing. All my work, all my innovations, everything I had done belonged to the Company and as a minority shareholder I had no power, control, or influence in said company.
I know we can never say never, but I honestly can't imagine a situation where I would ever be a minority shareholder again. People are greedy and both my business partners seemed like the most trustworthy people going and I regarded them as friends.
It sounds like you are making great money. My advice would be to stop investing in the company (both financially and technically) and simply operate the businesses 'as is' making good money for as long as you can get away with it. Save up as much of your wages as possible so that you have a pot to see you through when it does eventually blow up. It will be hard knowing they are going to screw you but, ultimately, the longer you tred water on a great wage the more you are screwing them back. If they ask why you aren't so committed, innovative, etc just make up some trouble at home that has you distracted.
Finally, don't go looking to harm or derail the business. It will only bite you in the ass. That's what I reaslised from my process, the business is a legal entity and it has done you no harm. As an employ and director, you have a duty of care to look after it and do it no harm. What will kill you is knowing that anything you do that's good for the business is ultimatley good for the other two and not you - that's the kick in the nuts. However, from a legal stand point, if you harm the business you open up a whole can of worms and make it very easy for the other two to get rid of you cheaply. That's why I say reign in your 'skill and innovation' and go through the motions month to month.
OP, you haven't explained the split between salary and dividend which will partly inform your next steps.
If the company makes net profit of £500k after paying you £50k, so the other shareholders enjoy £450k dividends (and you £50k), it is a different company from one that makes £5k after paying you £50k, with the other shareholders seeing you (and your salary) as a barrier to them increasing their dividend income by a multiple.
Whether you are deriving the majority of your income as salary, with the protection of employment law, or as a shareholder (with less protection) also matters here.
In the absence of that knowledge it would seem wise to:
1. check your employment contract for compete clauses etc,
2. then form a new company yourself (to do something different to what the current company does)
3. then invite the other shareholders to buy 20% of the shares in your NewCo between them and transfer the activities of the current company to your NewCo on the basis that 20% of something is worth more to them than 80/90/100% of nothing, and reducing the possibility of them sending lawyers after you!
If the company makes net profit of £500k after paying you £50k, so the other shareholders enjoy £450k dividends (and you £50k), it is a different company from one that makes £5k after paying you £50k, with the other shareholders seeing you (and your salary) as a barrier to them increasing their dividend income by a multiple.
Whether you are deriving the majority of your income as salary, with the protection of employment law, or as a shareholder (with less protection) also matters here.
In the absence of that knowledge it would seem wise to:
1. check your employment contract for compete clauses etc,
2. then form a new company yourself (to do something different to what the current company does)
3. then invite the other shareholders to buy 20% of the shares in your NewCo between them and transfer the activities of the current company to your NewCo on the basis that 20% of something is worth more to them than 80/90/100% of nothing, and reducing the possibility of them sending lawyers after you!
I was originally employed to do a multitude of tasks over 5 years ago.
I have completely automated my role, and that of the MD - that is why he can now live abroad and not work.
After the creation of the software that I wrote, he went on holiday and never returned.
[quote]:"I dont need to return, everything is being done for me
".
My role now consists of day to day support queries, changing products on website, and anything and everything I can do to better the company. I am always busy though, there is always something to do.
No shareholders agreement.
Currently on 40k Salary, but last year got a £12k dividend,
Other working director on the same as me above.
MD on £8060 and remainder of profits.
I have completely automated my role, and that of the MD - that is why he can now live abroad and not work.
After the creation of the software that I wrote, he went on holiday and never returned.
[quote]:"I dont need to return, everything is being done for me
".My role now consists of day to day support queries, changing products on website, and anything and everything I can do to better the company. I am always busy though, there is always something to do.
No shareholders agreement.
Currently on 40k Salary, but last year got a £12k dividend,
Other working director on the same as me above.
MD on £8060 and remainder of profits.
Foliage said:
How much cash did you invest?
None. Shares were given in lieu of payrise.There is a non-compete clause, its a niche market - I would be identified straight away.
I know I am on a road to nowhere. I will milk whilst I can, and if they decide to go ahead with their plan, then I will just leave, and if the system were to crash for whatever reason long after I leave - they will go back to earning less money, and doing more work.
Nevermind!
If it's a completely automated role, there's no shareholder agreement and you are sure they are starting you, why not just set up again on your own?
Even if the 'ip' is owned by the firm it shouldn't be too difficult to design a system that doesn't infringe and if they really do know nothing about the system then you could completely control what they own when you leave.
Don't be a victim. Take control and protect yourself.
Even if the 'ip' is owned by the firm it shouldn't be too difficult to design a system that doesn't infringe and if they really do know nothing about the system then you could completely control what they own when you leave.
Don't be a victim. Take control and protect yourself.
i can't help with the legalities, but i would if i were you, have a copy of the automated software you developed, then when you have the spare time at home, advance it even more, taking out any proprietary code so it can easily be seen as a product you are writing it in your own time.
you may then be able to market the software itself, or use it yourself.
i hope you took a copy of the files etc with the discussions in, then try and let them enforce a non compete.
i wouldn't however put anything in the code that deliberately stops it working when you have gone.
you may then be able to market the software itself, or use it yourself.
i hope you took a copy of the files etc with the discussions in, then try and let them enforce a non compete.
i wouldn't however put anything in the code that deliberately stops it working when you have gone.
smithydd said:
Foliage said:
How much cash did you invest?
None. Shares were given in lieu of payrise.There is a non-compete clause, its a niche market - I would be identified straight away.
I know I am on a road to nowhere. I will milk whilst I can, and if they decide to go ahead with their plan, then I will just leave, and if the system were to crash for whatever reason long after I leave - they will go back to earning less money, and doing more work.
Nevermind!
You didn't invest at the start, you have an employment contract and have a salary.
If you don't like where things are going find a new job, sell your shares.
Splats said:
Wow, this is just heartbreaking to read. I went through a similar thing last year but I wasn't as deeply invested as you. Our circumstances are almost identical though, I was in businesss with a 33.3% shareholding alongside two other 33.3% shareholders who were both related to each other. Just like you, I was the technical brains of the outfit and I spent almost a year working for £787 per month salary (no dividends) to build the systems and processes for the business to succeed. The instant the money started to flow in (and by god did it flow!) they took their opporunity to get rid of me for a total pitance making sure to legally lock up and lay claim to all the systems and IP that I developed.
In the end my lawyers bill was over 50% of my settlement and the process froze me out of working for almost 6 months. In total, I gave up about 1.5 years of my life, set up two people to be very successful and in that time I took home less than £20,000 for all my work and efforts.
I'm not sure how I can help you to be honest, other than to offer my sympathy. From speaking to the lawyers, it amazed me just how little I had in the way of rights or options. You might have more cards to play if you have been employed by the company for more than 2 years but I was basically on a hiding to nothing. All my work, all my innovations, everything I had done belonged to the Company and as a minority shareholder I had no power, control, or influence in said company.
I know we can never say never, but I honestly can't imagine a situation where I would ever be a minority shareholder again. People are greedy and both my business partners seemed like the most trustworthy people going and I regarded them as friends.
It sounds like you are making great money. My advice would be to stop investing in the company (both financially and technically) and simply operate the businesses 'as is' making good money for as long as you can get away with it. Save up as much of your wages as possible so that you have a pot to see you through when it does eventually blow up. It will be hard knowing they are going to screw you but, ultimately, the longer you tred water on a great wage the more you are screwing them back. If they ask why you aren't so committed, innovative, etc just make up some trouble at home that has you distracted.
Finally, don't go looking to harm or derail the business. It will only bite you in the ass. That's what I reaslised from my process, the business is a legal entity and it has done you no harm. As an employ and director, you have a duty of care to look after it and do it no harm. What will kill you is knowing that anything you do that's good for the business is ultimatley good for the other two and not you - that's the kick in the nuts. However, from a legal stand point, if you harm the business you open up a whole can of worms and make it very easy for the other two to get rid of you cheaply. That's why I say reign in your 'skill and innovation' and go through the motions month to month.
I have no idea how people can morally do that to someone never mind legally be allowed. Sorry to hear the OP and yourself went through such a thing with what only can be called as dogs for business partners. In the end my lawyers bill was over 50% of my settlement and the process froze me out of working for almost 6 months. In total, I gave up about 1.5 years of my life, set up two people to be very successful and in that time I took home less than £20,000 for all my work and efforts.
I'm not sure how I can help you to be honest, other than to offer my sympathy. From speaking to the lawyers, it amazed me just how little I had in the way of rights or options. You might have more cards to play if you have been employed by the company for more than 2 years but I was basically on a hiding to nothing. All my work, all my innovations, everything I had done belonged to the Company and as a minority shareholder I had no power, control, or influence in said company.
I know we can never say never, but I honestly can't imagine a situation where I would ever be a minority shareholder again. People are greedy and both my business partners seemed like the most trustworthy people going and I regarded them as friends.
It sounds like you are making great money. My advice would be to stop investing in the company (both financially and technically) and simply operate the businesses 'as is' making good money for as long as you can get away with it. Save up as much of your wages as possible so that you have a pot to see you through when it does eventually blow up. It will be hard knowing they are going to screw you but, ultimately, the longer you tred water on a great wage the more you are screwing them back. If they ask why you aren't so committed, innovative, etc just make up some trouble at home that has you distracted.
Finally, don't go looking to harm or derail the business. It will only bite you in the ass. That's what I reaslised from my process, the business is a legal entity and it has done you no harm. As an employ and director, you have a duty of care to look after it and do it no harm. What will kill you is knowing that anything you do that's good for the business is ultimatley good for the other two and not you - that's the kick in the nuts. However, from a legal stand point, if you harm the business you open up a whole can of worms and make it very easy for the other two to get rid of you cheaply. That's why I say reign in your 'skill and innovation' and go through the motions month to month.
Gassing Station | Business | Top of Page | What's New | My Stuff