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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46792
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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I am a company director to a firm that is about to be sold.

Customer Question

I am a company director to a firm that is about to be sold. I have been offered a position in the new purchasing company on a PAYE basis and a significantly reduced salary. What rights do I have. I am not the business owner, so will receive none of the proceeds from the sale.
Submitted: 1 year ago.
Category: Law
Expert:  Ben Jones replied 1 year ago.
Hello, my name is***** am a qualified solicitor and it is my pleasure to assist you with your question today. Were you an employee of the current company?
Customer: replied 1 year ago.
I received some PAYE payments as well as a Dividend
Expert:  Ben Jones replied 1 year ago.
How long have you been working there for?
Customer: replied 1 year ago.
15 years!
Expert:  Ben Jones replied 1 year ago.
Do you now if the sale of the company will be through a sale of the company's shares?
Customer: replied 1 year ago.
I don't, but I have a meeting tomorrow so can verify this. What else should I be asking? I have 1 ordinary share in the business.
Expert:  Ben Jones replied 1 year ago.
Are you a non-executive director or registered at Companies house?
Customer: replied 1 year ago.
registered at companies house
Expert:  Ben Jones replied 1 year ago.
Your rights would very much depend on your employment status and the type of transfer. Ideally you want t be able to show that you are an employee of the business because that would give you greater rights. Also as long as this is not a share transfer sale, you will be protected under a law known as TUPE, which would protect your employment rights on transfer and allow you to retain your existing terms and conditions. As the company is being sold you will likely be asked to resign as a director as new directors will be appointed. Also as you are a minority shareholder the majority of incoming shareholders could force you to sell your share. So your main rights are really linked to your employment status and the type of transfer. This is your basic legal position. I have more detailed advice for you in relation to the rights you get under TUPE and what the employer can and can’t do, which I wish to discuss so please take a second to leave a positive rating for the service so far (by selecting 3, 4 or 5 stars) and I can continue with that and answer any further questions you may have. Don’t worry, leaving a rating will not close the question and we can continue this discussion. Thank you
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46792
Experience: Qualified Solicitor - Please start your question with 'For Ben Jones'
Ben Jones and other Law Specialists are ready to help you
Customer: replied 1 year ago.
I know that the company buying the business have discussed TUPE for other employee with in the current business.So I do have shares to sell - is that correct? I was under the impression that I had no right to do this. what would my shares be worth? is this a percentage of the sale price?Under TUPE do I only have a right to the same amount of salary in the new company as I was paid under PAYE. My concern is that this was minimal.My existing Terms & Conditions that I wish to protect relate to income generate through dividend allocation. The salary for the position I have been offered in the new business does not cover what I take home currently.Where do I leave a rating? I am not sure my question has yet been fully answered.
Expert:  Ben Jones replied 1 year ago.
Well you have said you have 1 ordinary share so this is still a shareholding in the business, it means you own part of the equity, albeit a small one. So whether you get anything for that will depend on what the valuation of the shares was in the sale. Each share will have a specific value which the new business will pay to buy so you should still get the equivalent of 1 share in terms of proceeds from the sale. But don’t expect that to be much, we are talking just a nominal value and the share is really used to give you voting powers rather than any valuable equity in the business. When it comes to TUPE, you have the right to keep your existing terms and conditions so yes that would mean keeping your PAYE terms, including those on payment. Certain categories of profit share and share option schemes may not, by their nature, be transferable. For example, on a transfer, employees might cease to be entitled to participate in the transferor group's employee share option scheme. Indeed, some share option schemes provide that any options become exercisable on redundancy, as defined by ERA 1996. Although employment does not cease on a TUPE transfer, the courts have interpreted a TUPE transfer as triggering the redundancy provisions in a share scheme, thereby entitling employees to exercise their options in the transferor's share scheme. In practice, it is not possible for a transferee to provide that the transferred employees will remain in the transferor's share option scheme after they leave the transferor's group of companies. Therefore, it may be necessary for the transferee to provide an equivalent share option scheme, even if it is a "phantom" scheme. Alternatively, it may have to buy out those employees' rights. The EAT considered the obligations in cases where the transferor provided a profit sharing or share option scheme in MITIE Managed Services Ltd v French [2002] IRLR 512. The employees were contractually entitled to participate in a Sainsbury's profit sharing scheme before their employment transferred. The scheme entitled eligible employees to receive either a cash payment or Sainsbury's shares. The EAT held that "the entitlement of the transferred employees in a case such as this is to participation in a scheme of substantial equivalence but one which is free from unjust, absurd or impossible features". It is not clear how to measure "substantial equivalence". What is clear, however, is that a transferee who fails to implement a scheme, include new transferred employees within any existing scheme or offer suitable or satisfactory alternative recompense, may face claims from aggrieved employees.
Customer: replied 1 year ago.
so the fact that my terms now will not be equivalent to the new terms under the buying company (e.g. no inclusion in a profit share scheme and reduced earnings ) means I could negotiate something by way of compensation? Would assistance be available through ACAS although I am a Director (what I mean by this is my earnings have not all be through PAYE)?
Expert:  Ben Jones replied 1 year ago.
Yes you can - the law on the transfer of such benefits or terms is still a bit unclear so you cannot exactly go in there gung-ho and demand all of this, but you certainly have reasonable grounds to raise your concerns and make them think twice about just ignoring all of this. So you can negotiate with them over this. ACAS do not really offer assistance until a dispute is opened, for example when you decide to take the employer to tribunal and you have to use ACAS before you are allowed to make a claim, but you can use them because you still have employee status
Customer: replied 1 year ago.
Hi Again,After my meeting yesterday I have ascertained that the owner of the business has not expected to provide me with any satisfactory alternative recompense related to the new circumstances of my employment. In short the owners expectation was that I take the new position offered at a 30% take home salary reduction and no entitlement to any profit (currently I am entitled to 40% profit share of the business on top of my take home).
This is just not something I can do financially without major impact on my whole life.
Where do I go from here?
Thanks
Expert:  Ben Jones replied 1 year ago.
Hello, if they refuse to honour the current agreement then you are really looking at rejecting the new job and pursuing a claim for constructive dismissal and this is where you would contact ACAS first. But negotiation should be your first port of call - legal action always to be used as a last resort.
Customer: replied 1 year ago.
Constructive dismissal only relates to PAYE though (is that correct) and my salary generate by PAYE is only £15k per year. They are offering me £45k. But this is no where near what I take home at the moment. The rest of my monthly take home is made up of dividend generated by profit share. I draw from my dividend (profit share) every month to increase my take home over and above the £15k p/a . Does constructive dismissal cover me for anything other than PAYE?
Expert:  Ben Jones replied 1 year ago.
Yes it does relate to PAYE but your rights under TUPE and the protection of retaining your existing terms only applies to you as an employee. So you would have to rely on your status as a PAYE employee to be able to pursue this
Customer: replied 1 year ago.
I'm now confused. Can I pursue a claim for constructive dismissal on the grounds that the offer is not equal when my PAYE currently is £15k but they are offering me £45k (obviously more not less)?
Expert:  Ben Jones replied 1 year ago.
Ok, so under TUPE your existing terms and conditions. So the PAYE salary will be protected but as mentioned in my earlier advice the employer would also be expected to offer an equivalent for the share profit scheme. So you would be resigning on the basis that the overall package is not the same – that the salary and the benefits from the profit share scheme do not match what you currently enjoy.
Customer: replied 1 year ago.
OK - great. Thank you. How long is this question open for? Can I revisit again with any developments?
Expert:  Ben Jones replied 1 year ago.
Well it's 7 days, it doesn't quite mean you can ask unlimited questions though unfortunately because if it becomes more involved/complex then we will have to open a new question. But short queries can be covered in that initial period

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