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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3495
Experience:  Solicitors 2 years plus PQE
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CIC set up in 2011 with 3 directors to hold a service contract

Customer Question

CIC set up in 2011 with 3 directors to hold a service contract with a Charitable Trust. Prior to that Director A was employed for 18 months to set up an Early Years Centre. In 2012 Director B resigned. Director A and C carried on a rolling contract with the Trust. In 2014 Director C gave notice of resignation from the CIC stating a breakdown in communication with Director A. The written notice was given to the Trust. Both directors are also employed by the CIC but not the Trust. The policy and procedures for complaints held by the CIC and the Trust have not been followed. There has been no indication of disciplinary issues relating to the employed work. The Trust has given notice of termination of contract with the CIC. They have stated that they will withdraw this if Director A resigns from the CIC and hands the status over to them and have offered a payoff for the employed work. Director A has no intention of resigning and has asked for the correct following of policy and procedure which includes external support for conflict management. What are the rights of Director A, the Trust and the CIC?


Thank you.
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi,

Thank you for your question and welcome.

My name is AJ and I will assist you.

Does Director A have a notice period in the service contract?

Who is the shareholder of CIC?

Kind regards

AJ
Customer: replied 2 years ago.

service contract period 6 months.


CIC limited by guarentee.


 

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

The only party that has a right to enforce the contract against director A is CIC. If Director A resigns then CIC will firstly be potentially be liable for a fine by the secretary of state for not having a director and the guarator (i.e member) will have to appoint a new director and then they will decided whether to take proceedings against director A.

As far as I am concerned based on what you have described the trust has no rights other than (and I am presuming) its rights as member of CIC.

Director A cannot be forced to work but if Director A leaves the company without a right to terminate or expiry of the contract then CIC may have a claim against director A for breach of contract. You would then have to ask yourself what damage CIC would occur as a breach? If it is nothing (i.e time of finding a new director), CIC will find it difficult to bring a claim against Director A).

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 2 years ago.

I understand that the Trust can terminate the contract with 6 month notice as stated in the contract. They are requesting that the Director C who gave notice of resignation and made accusations about DirectorA would remain as Director keeping the CIC status but changing the name of the business. The Trust have requested that Director A resigns, may take the name but not the status and start up elsewhere with a small set up fee. Director A intends to remain as a director of the CIC and to continue employment. Do the Trust have any right to either request resignation or the CIC status or a change of directors?What options of response are there for Director A?

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

The Trust can:
1. Remove the Director; and
2. Change the name of CIC;

if the trust is the sole member of CIC.

If Director A's employment or contract is terminated he may have an employment claim and claim for breach of contract. Ideally CIC should sign a compromise agreement with Director A before allowing Director A to go off and use the CIC name.

Kind regards

AJ
Customer: replied 2 years ago.

The Trust is not a member of the CIC, they are separate bodies with a service contract between them. With only 2 directors of th CIC, one wanting the other out, who makes the decision to remove a director?


 


The history is Director C wants to be sole director and is trying to get director A to leave. Director C has persauded the Trust, through accusation to lose faith in Director A. The Trust has given the notice unless Director A leaves. it seems they have no rights to make these proposals. What responses can A give, taken that A wishes stay in the business?


 


 

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

Who is the member or members of CIC?

Kind regards

AJ
Customer: replied 2 years ago.

The two directors are the members, it is Community Interest Company with non profit limited by guarentee.

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

Is there anything in the constitution that say the trust can decide who the directors are?

Without any guidance from the CIC constitution then only members have the powers to remove directors.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 2 years ago.

Hello


 


The CIC and the Trust are separate 'bodies', so the Trust does not have a say in how the CIC is structured. I think through the service contract the Trust can decide to lose faith in delivery of service and give notice. On termination of the contract the premises would be withdrawn and the CIC would either have to fold or find another contract or premises. If director C decided to carry out resignation from the CIC could they then take up a contract with the Trust again? What happens to the present employees?


Many thanks.


 


 


 


 

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you.

Does Director C have a contract with CIC? AN employment contract?

If so does it have any restrictions?

Kind regards

AJ

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