How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Alex J. Your Own Question
Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3694
Experience:  Solicitors 2 years plus PQE
13113900
Type Your Law Question Here...
Alex J. is online now

I run a small business. Just over a year ago I took on a business

Resolved Question:

I run a small business.
Just over a year ago I took on a business partner as sales director
In November 2014 he invested £10,000 in the business for a 20% share
We signed a shareholders agreement
We signed a directors agreement
He always complained about money but when told well sell more he didn't
He had one or two good months but out of the 18 he was with us he failed to deliver on the majority of occasions
I agreed to pay him 15% of net profit on all his own sales, but before I would pay commission! I asked for a full sales plan including monthly targets, which has never been delivered
The directors agreement required 180 days written notice
I have never had such written notice
In late October early December he told me he wanted to leave as he had been made a job offer that he wanted to accept.
I said okay as I saw no point in persuading him to stay.
Still no written notice.
He announced that he would leave at the end of December, again I said okay, but still nothing in writing
He started to work from home and it became obvious that he wasn't working or at least not for my business.
I told him that due to his lack of written notice and in lieu of his 180 day notice period, I wanted him to leave on 30th November, I saw no point in paying him for doing little if anything for the company.
I made a reasonable offer to allow him to convert his shares to a company loan that the company would repay over a four month period.
He replied rejecting the offer and putting a counter offer of over £15000 which I feel is unreasonable due to both his actions and lack of performance.
He is now claiming that I owe him commission, salary for December and that I have to make him an offer for his shares, which I have told him I don't want to buy but will not stand in his way if he finds a buyer himself.
I want to understand my legal position and responsibilities, if I have to pay the claimed Sakarya and commission I will.
He us no longer a Director or employee
Advice would be very much appreciated
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Was he actually paid a proper salary? Did he have an employment contract?
Customer: replied 1 year ago.
Yes the directors agreement also served as a contract of employment
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Did you pay PAYE or National Insurance on his salary?
Kind regards
AJ
Customer: replied 1 year ago.
His basic was the same as mine £671 per month buit one month we paid commision so it was elible for NI and Tax, so yes he was registered with HM Tax office I have attached his wage slip, he was also paid £300 per month as dividend based upon his 20% holding
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
The fact is he has left the business now and you are under no obligation to buy back his shares.
The main issue you have is whether he brings any employment claim against you. Did you follow any procedure when you terminated his employment?
Kind regards
AJ
Customer: replied 1 year ago.
We did not terminate his emaployemnt as such he gave notice.
In the Directors agreement he signed it states that he has to give us 180 Days notice in writing, we have never had that.
It was lossly agreed that he wopruld leave at the end of December, I then got a message that he wanted to leave on the 17th as he had a Christmas party with his new employers on the 18th.
That was in Late October.
He then began working from home, but it was obvious that he was not doing anything and was just strining me along so he could get paid for Novemeber and December, whilst I worked 7 days a week 12 hours a day.
I decided that I wasn't going to stand for that so I sent him notice that the company would terminate his employment on the 30th November, in lieu of his never having given me 180 days notice and has never actualy put his notice in writing.
I have paid him salary and Dividend upto the 30th November.
All this was put in writing and sent to him registered post (copies attached).
My take on this has been that he is in breach of contract by not gioving the 180 days notice in writing and additionaly never having put his notice in writing.
There have been numerous breaches of the agreement over the past year, but I have always cut him some slack, thinking that he will imoprove, but alas no.
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
The main issue is that even though he quit he could still claim constructive dismissal. I would say he may struggle to do this especially as he told he had accepted another job.
In terms of your claim against him, have you suffered any loss as a result of him not serving the notice?
Kind regards
AJ
Customer: replied 1 year ago.
Not really we have taken on an engineer in his place and business is booming, so I cant complain, I just don't like paying lazy non productive time wasters (sorry frustration)Whay happens next, I obvioulsy need to get a solictor to write to him laying, properly, my position
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
Unfortunately you do have to pay him what he is entitled to - salary for the period he was there if he was under contract in that period.
You may have grounds to say that it should be offset against what he owes you.
Personally if I were in your position I would use the lack of notice to put pressure on him to sell the shares back at a knock down rate, ultimately you need free and clear of this person.
Getting a solicitor to write a without prejudice offer for the shares and as settlement for any future claims may get the ball rolling.
Alternatively what until the company needs funds to trade or expand, and start to dilute him out. You have enough shares to force him to give up his pre emption rights on any new share issue. Only thing is you need to make sure you dilute him for a legitimate reason.
Kind regards
AJ
Customer: replied 1 year ago.
I have no interest in the shares as I am sure no other investor is on the horizon, we are a small company T/O £250K so I am in no rush.
With regards ***** ***** salary etc, what do I have to pay him and when, if he starts to go down the legal route and then I pay up before it goes to tribunal, is that okay? I suppose what I am saying is can I make him sweat a bit first, I am an honourable man and if I legitimately owe someone something I will always pay
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
He only has three months to bring a tribunal claim - after that he would have to make any claim in the county court.
If you do pay up you would want him to sign a compromise agreement so that he gives up any rights to future claims.
Ultimately you should not have to pay him for the notice period he has not worked especially as he has taken another job.
Kind regards
AJ
Customer: replied 1 year ago.
Thanks for this, just so I am 100% clear, do I need to pay him to the 17th December or not.Many thanks
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
You do need to pay him for the days he has worked.
If you are going to make a claim for breach of contract for his failure to give notice I would recommend you at least notify him of your intention to make this claim with a solicitors letter, before paying any money. You do not want him to think that paying him money has some how waived your right to a claim.
Kind regards
AJ
Customer: replied 1 year ago.
Okay so his last day of work, as far as I am concerned was 30th November 2015.
He has been paid upto that date.
I have told him that I am looking at my options one of which might be to counter sue for breach of contract due to his failure to submit written notice and to give the required 180 days notice.
Thanks for your help, I just want to be certain I do things in the corrcet order, pay what is due and then decide that if he persist in his claim, wether or not to counter sue or just deal with the issue in the tribunal.
Expert:  Alex J. replied 1 year ago.
Was that the date he notified you that he would no longer be coming into work as of 17 December 2015?
Customer: replied 1 year ago.
No, the date he told me he would be leaving the business on 17th December was 13th November 2015, tat is also when he started 'working from home'.
He has been paid up until 30th November, which was the date I told him I wanted him to leave
Expert:  Alex J. replied 1 year ago.
Hi,
Thank you.
To be honest with you might as well try and get away with only paying him to the 30th if you feel that is fair, but if it he makes a claim and settlement would mean paying him to the 17th then I would just pay it.
The time wasted defending any claim would not be recoverable and you would likely only recover a fraction of your costs.
Kind regards
AJ
Alex J. and 7 other Law Specialists are ready to help you
Customer: replied 1 year ago.
Thanks for all your help it has been much appreciated and has helped a lot.
Regards
Duncan