Calling all Business brains/Lawyers - help please!

[Sonnet]

Hi everyone - it's a long time since I posted on here, some of you may remember me but where do you go when you have a personel catastrophie - where else but mumsnet.
I so dreadfully need some advice, words of wisdom or just plain old words of comfort.
My DH works for a small company (only 4 of them. One of the other members died last week and although he was old it was still a dreaful shock. He was the majority shareholder and has left his shares to a family member, who never having a job in his life ( dispite being in his 40's) now sees this company as a cash cow. The guy who dies was in retirement and hadn't taken a salary for years - his recipiant of the shares has demanded a salary, dividend etc which the company cannot afford. There are issues in the background anyway which have never been resolved to do with salary levels. DH being the only man works a 5 day week whilst the other two work part time for the same money and it is very difficult for my DH to take time off. The only way the company can afford to meet this guys demands is to reduce their own salary/dividend - It would mean cutting DH's income by 50% - he is angry with this as he is the only one who puts any effort into the company and he just sees more and more hard work for less and less money. He hasn't had any pay rises for 4 years as it is as the company cannot afford it.
I am of couse worried how on earth we'd manage with 50% of DH's income gone!
What should he do - buy the guy out? (assuming he is willing to sell and we can "find" the cash)
Should he resign - the company wouldn't exist without him as the other two do part time hours and don't work in school holidays! - amy legal advice would be so so appreciated I am worried sick and nursing a poorly 3 yr old....Mumsnet aleays seems to come up with the answers so her is hoping....

Can't offer any advice, sorry but it sounds like a pants situation to be in. I'm sure someone in the know will come along in a minute.
Bump!

I think it might be worth consulting a lawyer - I don't think these changes can be imposed without agreement but it all depends on the legal agreements in place or imputed if nothing is written down. It looks like quite a lot is potentially at stake so it would probably be worth paying for professional advice. Try and keep unemotional about the whole situation (I realise that's easier said than done). Good luck

Thank-you both for replying....
Have spoken to DH and he is on the scent for a business lawyer - big prob though is that NOTHING is written down. DH dosn't even have a contract. he/they were always lead to believe (and in fact told) that the shares would go to one of the existing people - that wouldn't have left DH in a particularly enviable position but would have left in a very good position to insist that long overdue changes were made...
On the bright side though - no contract means he is not prevented from starting up another company (and pinching clients!!).
He found out at about lunchtime and I've never seen him so wiped out....I just don't know how to help him - never mind my fears for our immediate financial future!!
Thanks for replying - I do so nned those words of comfort!!

I am not a lawyer but do have an MBA degree. It sounds as if your dh is actually in more of a power position than he thinks. I know at first the shock of something like this makes one panic but basically I feel that he should stand his ground. This other person is just making outrageous demands to see what may fly. I feel that either 1) your dh will be able to start up another company fairly easily since there is no contract and he does most of the work anyway or 2) the threat of same will cause this new person to back down.

Consulting an attorney as well is always an excellent idea. Good luck!

Normally shares will have certain dividend rights attached to them, although of course if he is now the majority shareholder, he might be able to amend those.

I can't see how your dh can carry on with this - it might be that he has a very long fight and lots of legal fees not to achieve anything really worth while. It might be better to act quickly, get out and try to take advantage of the situation. (as this company will be in chaos for a while, he might be able to benefit from that). I know it seems a bit dog eat dog, but there is no point being a financial matryr for some a*sy shareholder who he has no allegiance to.

A shareholder can of course demand a dividend, if the company makes sufficient profits to pay a dividend to all shareholders. However, I've never heard of a shareholder demanding to be paid a salary if said s/holder didn't also do a job of work for the company. I'd say this chap's talking b*llocks.

I would definitely get the whole set up looked at by a business lawyer as it sounds very haphazard to say the least. At the same time, your dh should look at the possibility of setting up his own company and pinching both clients and employees from the old one!

How big a majority does this guy have? Is your dh a shareholder? (It's not quite clear from your post)

It could be that your dh and the other shareholders together can outvote the new shareholder anyway.

Anyway, they cannot enforce a 50% paycut on any employee, it is tantamount to dismissal, and if he can't do anything else your dh can make it clear that he will sue for constructive dismissal.

Even tho' he has no formal contract there are basic terms which have to considered part of an employment contract.

If they manage to sort this out, It may show them that it is time to formalise everything correctly. including proper employment contracts, and what happens to the shares if anyone else dies.

thank-you so much everyone for replying - your replies made me feel so much calmer!

Dh and the other 2 have consulted a business lawyer and are now getting the company valued - it would appear that the method of payment to Dh and the other two ( 50% salary, 50% guarenteed divi) makes the company look more profitable than it actually is - so this is being reflected in the valuation. The next stage is to make this guy an offer - if this is turned down, Dh and the other two will set up on their own - I owuld expec that the majority of cients will move with them as Dh has been dealing with them for 12 years plus and I would also expect the majority of employees to move with him too.
Dh is looking far less "crushed" than he was on Monday - it was this that upset me so, money is money BUT seeing Dh look so sad and defeated and worring about us (me and the 2 dd's) upset me far more.He feels very hurt by the Guy who has died..
Thank-you all once again - hopefully something will rise from the ashes and DH has realised it is definatly time he sorted out his position rather than rely on "trust" again!!

Hi Easy - they cannot outvote the new shareholder - he has 54% and the other three have 46% between them.
I very much doubt he will dis -appoint them off the board of directors because that could be constructive dismisel as you say. The worry about the pay cut was to do with the way that they are paid - about three years ago they converted their salary to 50% paid on a monthly basis whilst the remaining 50% was paid as a dividend twice a year. With another salary coming out that would reduce the profits and therefore getthem in hot water as far as paying out a divi - God knows why this was done in the first place as DH is forever juggleing and transfering money between accounts!!
Thanks for your advice - fingers crossed things will work out somehow and I get my happy DH back again!!