Redundancy - Shareholder

[JoeMaplin]

Does anyone know about this? If I am a minority shareholder (gifted shares value £1,000) in a company as well as an employee, do I still retain my employment rights e.g to redundancy unless I specifically meet the requirements of being an 'employee shareholder' (I don't think so, not least because I have never received employment particulars to say or advice that I have given up employment rights).

TIA

You need to separate being an employee (from which you can be made redundant) from being a shareholder (which you should? maintain post redundancy unless some odd clause).

Do you have a salary?

Shares are not worth £1000- shares are worth the dividend value. So if I own £35 of shares when the company has £55 in total of shares but the profit after tax is £55,000 then I receive £35,000.

Yes to salary. Was given shares of 5% of company which they said had a value of £1k (Maybe this value was for tax purposes, not sure ). Am paid mainly salary, but a fixed amount of dividends each month too. Am not a dire tpr of the (ltd ) company. Took a salary sacrifice for the dividends. Now redundancy is on the cards, apparently I have no redundancy rights. Google tells me that 'employee shareholders' give up their employment rights but there are rules such as the shares being valued at more than £2k and also them actually being aware they have given up employment rights, it seems the company have to pay for independent advice for the potential employee to ensure this happens- none of this seems to apply in my case. I do hope this makes sense, I'm even confusing myself!

director

Arghh, am NOT a director !

Are you on the register of shareholders at companies house?

They cant make you redundant as a shareholder. If they continue to make profit you will continue to receive an income whether you work for them or not (unless there is an odd clause but even then check it out with a lawyer).

Shareholders own the company not directors.

gov.uk says - To be an employee shareholder, you must own shares in your employer’s company that were worth at least £2,000 when you got them. They also are obliged to proved you with independent legal advice before you take this route- did that happen?

This website is detailed

www.lawdonut.co.uk/business/business-ownership-and-management/shares-and-shareholders/what-is-an-employee-shareholder-contract-and-is-it-right-for-my-business

When did you get these shares i.e. What year?

Either 2012 or 13, will need to check. No independant legal advice and no information about giving up employee rights, only a letter stated they were worth £1000. Not listed as a director at companies house. Thanks so much for advice so far, just rushing off - will look at link later. Have long service so redundancy even at statatory would be significant.

Becoming an employee shareholder means a change of contract. Other requirements:
The individual must not pay for the shares in any way.
The employer must give the individual a written statement of the particulars of the status of employee shareholder.
The individual must get advice from a relevant independent adviser on the terms and effect of the written statement. The company is required to pay for that advice whether the individual accepts the job or not.

You say you paid through salary sacrifice? That sounds to me like you did pay for the shares.

If ALL these conditions are not met you are not an employee shareholder, just an employee who happens to own some shares. If the latter, your rights are not changed.

Realistically, if they want to make you redundant, they probably can, but it doesn't sound as though your employment status has changed.

", just an employee who happens to own some shares. If the latter, your rights are not changed."

This is what I think you might be too.

Employee shareholder status is a specific scheme introduced by George Osborne around 2012. It was very unpopular and had very little take up. Its now being withdrawn as per last budget. It's highly unlikely this is the basis of OP's share awards.

OP- do you have a Shareholders Agreement? This will detail how shares can be sold. Many employee schemes stipulate shares must be sold back to the company when employment ceases. They should be bought back at current share value so might be more or less than £1000. (Previous dividend value is not relevant)

You can be made redundant m, but unless you knowingly entered into an employee shareholder status agreement, and received independent advice, then you have same rights as any other employee.

I advise on share schemes (and lobbied against employee shareholder status! )

Shares are not "worth the dividend value" on disposal though. It doesn't work like that. A company can make a profit but not declare a dividend and the value of any dividend declared at any particular time is largely irrelevant when it come to valuing the shares. The value of the shares may well be pretty minimal if the company is a small limited company.

But your shareholding is different to your employment status. It doesn't sound like you're an employee shareholder (although you are both an employee and a shareholder - I appreciate that is confusing)

You need to speak to an employment solicitor. PM me if you want a referral (I run an employment law firm)

Crossed posts with Olly and agree with Olly's post completely.

Gosh I completely disagree with olly's post. There has been a massive take up in employee shareholder shares. However also agree that you couldn't pay for that type of share so the salary sacrifice arrangement shouldn't have applied.

Rarely used according to HMRC www.personneltoday.com/hr/employee-shareholder-contracts-rarely-used/

Gosh I'm genuinely surprised by that. Thanks for the link.

It always struck me as a terrible scheme

Wow, thanks everyone - so helpful. It is so confusing. Basically took a cut in salary to have a similar amount paid in dividends as it is (or was then) more tax efficient. So, instead of before getting for example £2500 net salary per month, afterwards got say £1500 salary and £1000 paid as dividends. Thought it was a just a more tax efficient way, had no advice internal or external that it meant giving up employement rights such as right to redundancy pay! The shares were paid for - so company gave me £1000, and I then bought the shares with this amount (I know, it is confusing!!) Issue is the company might be making redundancies or even go into administration, and I'm being told I would have no right to redundancy (long service too). Obviously want to do everything possible to prevent company going down as very loyal but can't work out if I would have the right to redunancy pay. Everything I have read indiciates I am NOT an employee shareholder as I 'paid' for the shares, was not given a new contract and did not receive any advice.

Thanks if you have kept with me so far!!

Unless your situation meets the very specific criteria outlined earlier in the thread, you do not have employee shareholder status, you are a "normal" employee who also owns shares, and therefore you have the same rights as anyone else, including redundancy.

Thank you flowery

Do you know if it matters if the shares were given/bought in 2012 as I believe legislation changes in 2013.

makes no difference. There was no such thing as employee shareholder status involving giving up rights for shares until this specific scheme was introduced.

And even if you had purchased the shares after the scheme was introduced, unless you meet the specific criteria set out above, you still don't come into employee shareholder status anyway- you're just an employee with shares.

Everything you have said suggests that you do not have ESS - Employee Shareholder Status.

You are an employee who is also a shareholder. You have employment rights as do other employees and this includes the right to redundancy pay. If the company goes under, you will still receive statutory redundancy pay and it will come from the insolvency service.

If the company goes under it is likely your shares will have little or no value. If you are made redundant while the company is still solvent then you may get some value back for your shares - but it is hard to give general advice because share schemes differ greatly, and are attached with different rights and conditions.

Thanks so much everyone, very helpful advice. Such a stressful time, and everything you've said has backed up what I'd read - that I would still be entitled to statatory redundancy, which would at least give a bit of a buffer due to long service.