Employees and Directors

[yottie]

A friend of mine has been employed for some time by a small firm.
His role, up to this time, has been that of an employee of the firm, with a fixed salary.
He has recently been offered the choice to carry on as before, or become a Director of the Company.
I have no financial details of the company but I suspect that the "new post" would not be to his advantage.
Any thoughts would be most welcome.

 

[Notch7]

A director is still an employee.

it rather depends on what the package looks like.

Do you mean they might want to pay by dividends instead - not actually that easy.

Im not sure about IR35 or if it’s relevant.


If he is a director, what liabilities will that bring?
He should be very careful if a directorship means he will become a guarantor for a lease, overdraft, trade accounts etc.

 

[Lower]

A director is still an employee.

it rather depends on what the package looks like.

Do you mean they might want to pay by dividends instead - not actually that easy.

Im not sure about IR35 or if it’s relevant.


If he is a director, what liabilities will that bring?
He should be very careful if a directorship means he will become a guarantor for a lease, overdraft, trade accounts etc.

May become a guarantor. That is the whole point of a limited company.

 

[yottie]

Many thanks.
I was assuming that he would (perhaps) continue with his present situation but that his income might depend on how the
firm was doing (I realise that this is only known at the end of a set period perhaps).
As you say, it all depends on the package.
It might be my suspicious mind but I can't help feeling the new situation is unlikely to be to his advantage (the way things
are generally!)

 

[Mottie]

Has his employer explained why they are offering him a directorship? Has he asked why?

 

[Deleted member 292770]

scapegoats normally.
Just look at companies house company employee listings.
They don’t last long.

 

[noseall]

Has his employer explained why they are offering him a directorship? Has he asked why?

Perhaps its something as simple as a promotion?

 

[Mottie]

A director is still an employee.

Wrong. Not automatically they aren’t.

 

[Justin Passing]

Way back, the owner of a weak company I worked for offered directorships - himself not being a director. Three accepted, I declined. He took out all the money he could, the company went into administration and the directors had to deal with possible constraints on their future activities.

 

[ajohn]

A cousin of mine's sister married a pretty serious business person who also networks. Seems that is what he mostly does these days. It involves introductions, people to people who can be advantage to each other. Various advice etc.

Anyway cousin ran into job problems and was introduced to a company he could join as a director. The catch was backing the company with some of his assets as security. Worked out fine and he is now retired etc. It may be that sort of deal.

 

[Dork Lard]

I'm currently a director of 17x Co's.

When I was young, beautiful, rich beyond your wildest dreams & very very wet behind the tabs I was invited to become a director of a tool hire Co', an industry that was very much in its infancy back then.

I admit that I was flattered & I admit that I didn't fully understand the implications, but as you all well know, I am incredibly stupid.

So stupid that I didn't do any research whatsoever into either the Co' involved, the people offering this once in a lifetime opportunity, or the possible implications to me personally if/when it all went breast side up. In fact, I dearly wish there was an internets that I could get someone to ask Qu's on my behalf back in them days . . . . . .

I politely declined.

More years than I care to admit later I bumped into one of the characters involved in that Co', apparently the prime movers behind the business all did a few years for VAT fraud because they couldn't find anyone daft enuff to jump in & carry their can.

 

[Notch7]

May become a guarantor. That is the whole point of a limited company.

That’s the point of a personal guarantee, it jumps over the limited company avoidance of liability.

No bank would offer an overdraft without a guarantee.
same with a landlord.

People who set up businesses often have no idea of the personal liability they are letting themselves in for

 

[Mottie]

No bank would offer an overdraft without a guarantee.

Wrong again. Yes, they would. Depending on your business credit rating.

 

[Dork Lard]

Wrong again. Yes, they would. Depending on your business credit rating.

St' Atus is the patron saint of all finance.

 

[Notch7]

Wrong. Not automatically they aren’t.

boring point scoring

its most likely to be true in the context of this thread

Wrong. Not automatically they aren’t.

boring point scoring

it is most likely to be true in the contest of this thread

Wrong again. Yes, they would. Depending on your business credit rating.

boring point scoring

it is most likely in the context of this thread

and almost certain in all cases unless the directors had significant assets