I am a director, who is my employer?

[nocontrol]

I will try and cut this long story short, but it is quite complicated.

I am a director of a company, along with one other person, who is based in a different office about 200 miles away. We are a very small company of 9 employees, created out of a former group of companies - which are now all separate companies running separately and nothing to do with each other, apart from sharing office premises (the office 200 miles away)

I was informed today, by one of the shareholders, that a letter would be going out to all staff tomorrow informing us all (2 directors included) that we are at risk of redundancy. She would say no more than that, she said her hands were tied, and I imagine she shouldn't have even told me that much, but as we have known each other for a while, she felt personally obliged to give me and the other director the heads-up.

Neither myself nor the other director had any idea this was coming - although the business is not making loads of money, we are "washing our faces" which is what we were tasked with when our company was split off from the others. We have no cashflow issues (although things are tight) and have had no need to go to the shareholders for cash injections for about 18 months. We have all worked hard to make the business work and all of our plans and projections suggest that we can do just that.

As with all small businesses, we accept that things are not set in stone, and that things can change rapidly, however, we (2 directors) have been feeling fairly optimistic over the recent months.

Apart from reporting back to them informally on an irregular basis, the shareholders (who are not direct shareholders in our company, it is owned by an offshore company which is then owned by them) have had nothing to do with the running of the company, so for them to swoop in and do this out of the blue has absolutely knocked me sideways.

They want me to let staff know tomorrow and then the letters will be emailed and posted tomorrow. However, my fellow director is away on holiday until Monday evening and we both feel strongly that a) the message should be delivered in person, rather than me phoning people up to tell them (which is the only alternative while she's away) and b) as we are the only 2 directors of the company, we are the people who should be making decisions about this, not 3 remote people who obviously have other agendas.

Trying to asses the legalities of this (with no expertise whatsoever) and having looked at redundancy processes online, I would like to know who is our employer? You would expect letters like this to be written by directors - but we haven't written them. If it is "the employer's" decision to put people at risk of redundancy and we as directors aren't acting as "the employer" who else has the right to make this decision? Can the shareholders legally do this completely independently of the directors?

I've been told the plan is to have consultation meetings for my office next Wednesday, and they do have a legal person involved, but I would like to be as well equipped as possible before my conversation with the shareholder tomorrow. At the very least, we want to get the letters stopped until the other director is back from her holiday and can see people face to face.

I'm sorry this is so long, I would be very grateful for any thoughts people may have.

[nocontrol]

I'm not exactly sure if they are directors of the holding company, or if there are other companies involved. I realise this makes me sound a fool.

But as shareholders they can do this? With no notice nor any explanation? Fucking sucks. Excuse my language.

I have been a 100% solid gold mug.

[nocontrol]

Management buy out might be possible if they will take £50 or less for the company...

[nocontrol]

Anyone else got any advice? Other than get your CV sorted...

[flowery]

Your employer is the company, and yes the owners of the company are allowed to decide to wind it up. If you are a director (in the sense of having Companies House responsibilities rather than it just being a job title) it seems strange they haven't involved you in discussions sooner but if they are following a consultation process as it sounds as though they are, then they are doing what's legally required.

Do you have directors service agreements?

[nocontrol]

I don't know what the company is worth, and to be honest, I don't know how you would calculate it. We are in one of the service industries (don't want to be too specific) and therefore don't have "goods" or "stock" that have an intrinsic value. We have a client base from whom we earn ongoing income, and who we charge fees for work we do for them.

Whether someone else would be interested in it, I have no idea, obviously as this has come completely out of the blue, I have never considered this.

From previous experience, having been involved in these processes with the same people driving them from the "other side" I think they have made a decision about what they want the end result to be, and will not be dissuaded from that.

They either want to get rid of the company, or they want to get rid of one of the people earning the highest salaries, which is me, the other director and one other person. Without any one of the 3, the company cannot work. I said that to the shareholder when I spoke to her. She acknowledged what I was saying.

To me, this is a deal breaker anyway. I never agreed to be a director to be a "puppet" at the whims of the shareholders - I (and the other director) thought we had moved away from that place. IF that's not the case, then I have to reconsider and realistically, get out ASAP.

[nocontrol]

Yes, I do have directorship at Companies House, but no, we don't have directors service agreements.

Obviously I have been incredibly naive. I believed what I was told. More fool me.

[senua]

They want me to let staff know tomorrow and then the letters will be emailed and posted tomorrow.

No way. Don't get dragged into things that are not your decision.

[senua]

I have to reconsider and realistically, get out ASAP.

Don't jump, wait to get pushed. But do get busy with collecting as much data as possible that might be useful if you start up on your own.

[nocontrol]

Ideally we want to postpone the letters going back until the other director is back. I think that's all we can hope to retrieve from the situation; someone being there to talk to staff in person when the letters come through.

I don't see more than statutory redundancy being offered, which will give me about 5 weeks' salary. Which is not much but will hopefully allow me some breathing space. Definitely better than just walking away.

[flowery]

"To me, this is a deal breaker anyway. I never agreed to be a director to be a "puppet" at the whims of the shareholders"

But surely you accept that the people who own a business are the ones who get to make this kind of fundamental decision about it?

[senua]

Disagree flowery . Directors are decision makers. They are they to make decisions on behalf of the company. If the shareholders don't like it then they sack the directors. They don't set themselves up as shadow directors in opposition.

[nocontrol]

I do accept it as a general principle. But not when you have been told you will be left to get on with it, you do what has been asked (ie ensure the business is paying its way & becoming more profitable) & then out of the blue you're told it's all over.

I expect to be treated with more respect than that. But as I say, I am willing to accept I have been naive.

[nocontrol]

Doesn't stop me feeling bad about it. And about having to tell the people who work for me, who are my friends (right or wrong that's the way it is in such a small company).

But my main question has been answered. Yes they can do it. And obviously they know that.

[nocontrol]

Starting something from scratch with the other director is not practical,due to the distance. We were thrown together by fate and there's no way you would put together a business with 2 such disparate locations.

To be honest, I became a director just by circumstance, rather than by looking for it, and I don't know that I want to carry on down the path of running a business; I've found it quite stressful & don't think I'm really cut out for it. I think I'd rather take the hit on salary & go & work where someone else is taking all of the risks & stress.

[Stillnoidea]

Have you taken a look at the company's articles of association to see if there is any relevant information in them? You should be able to download a copy from companies house.

I guess if you are owned by a single company there won't be any subscription agreement or similar governing these decisions.

[nocontrol]

I will give thought to what alternatives I can offer in my meeting though.

[senua]

They're not setting themselves up as shadow directors

I still think that they are. They are shareholders; they have very little actual power. They can wind up the company if they want, but in that case they probably need to appoint an Administrator or Insolvency Practitioner.
I don't think that they can override the board of directors (although they can dismiss them). Get legal advice.