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: 3843
Experience:  Solicitors 2 years plus PQE
Type Your Law Question Here...
Alex J. is online now

There, I am sole director but only 30% shareholder of a

This answer was rated:

Hi there, I am sole director but only 30% shareholder of a company that is in financial difficulty. The remaining 70% is controlled by a holding company and one of it's directors. I have called in an insolvency practitioner to deal with closing the company under my director responsibilities. The next step is to cease trading and existing staff are all being made redundant including my wife and myself who are both employees.
In the meantime I have set up a new company with just my wife and myself as shareholders and me as sole director.
I have 2 questions really.
Firstly if the shareholders will not allow the business to close do I need to resign and get them to appoint a new director?
Secondly, can I employ some (not all) of the old company employees in the new business or will I fall foul of TUPE ?
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
1. If you know the company is failing and the shareholder will not let the company close then I would follow the advice of the insolvency practitioner. There are various offences under the Insolvency Act 1986 that can make you personally liable for the debts of an insolvent company (See S.214-217) - you can defend yourself against such offences by showing you took independent advice and followed it. I would suspect that the IP would recommend you resign. You should also just resign if you want to start trading a new company.
As a separate point make sure the new company does not have the same or similar name to the company you are leaving. If the company you are leaving goes insolvent within 12 months and you are involved in the management of this new company you could be liable for an offence of reuse of company names under S.216 of the Insolvency Act 1986.
2.TUPE only applies to the transfer of an undertaking - moving to a new company and taking one employee from an old company is unlikely to create a TUPE transfer of all the staff, unless that one employee represents the whole business undertaking.
Kind regards
Customer: replied 2 years ago.
Hi AJ, Firstly the newco has a completely different trading name and address so should be OK there.
I am planning to take 2 of the 5 ex employees to the new company only.
Are you saying I would be best to resign anyway? If so would I then lose out on my personal redundancy?ThanksTony
Thank you.
If you think a redundancy payment is a realistic prospect then I would not resign, but at the very leas follow the advice of the Insolvency Practitioner.
You are not transferring a business to new co, so taking the employees would not trigger a transfer. Do you have any non solicitation restrictions in your contract?
Kind regards
Customer: replied 2 years ago.
Hi AJ, the company and it's shareholders do, but these cease in the event that the business ceases trading. Therefore once trading stops I am free to approach the old business' clients.
The insolvency practitioner has said that as I am an employee and only hold 28% personally (my wife owns 5%), we should both be entitled to redundancy. For me this is the best part of £11k as I've been with the business for 20 years. We do not intend to claim for our 10 weeks lieu of notice as I will in effect be initially an unpaid employee of newco.CheersTony
Thank you.
I would follow the IPs advice that is the best way to have a defence against any allegations of wrong doing.
Kind regards
Alex J. and other Law Specialists are ready to help you
Customer: replied 2 years ago.
Thank you Alex, I will follow advice of IP as recommendedTony
No problem.
I wish you the best of luck.
Kind regards