I was hired by a businessman in 2004 to design and build the IT
infrastructure for his new company. Halfway through the work I was
appointed as the Technical Director of the company and registered at
Companies House. I also received a 1% share. The Businessman (owner)
owns 98% of the company. After 8 months the work was completed, the
premises chosen, marketing materials ready, employees ready etc. The
e-commerce website was finished (under a fixed separate agreement) and
a call centre, distribution and teleworking strategy defined and ready
to implement, plus much more.
When the target launch date arrived the owner delayed the launch over
the marketing and website not being fully ready, the marketing manager
and I disputed this but to no avail. The owner became increasingly
aggressive to all parties and ceased all funding, he closed down his
own office and let go the staff (5 employees). In turn I had to let go
3 personnel I?d hired in my small IT company to work on the project.
There was no apparent reason why he decided not to go ahead as funds
were not a problem, the owner is very wealthy and income would have
started on day 1 of the launch. After a couple of months, the owners
lawyers threatened to sue me for not completing the website work. I
said the site was finished and was still owed the final payment. After
legal back and forth the website was assessed by a court appointed
expert. The expert commended the website and certified it to be ok.
The owner then paid the outstanding amount for the website part of the
deal. The owners lawyers have written to say that our business
relationship has broken down and they want me to resign as a director
and return the 1% share for the sum of £1, otherwise they will remove
me under section 303 of the Companies act.
There are financial reasons why the owner wants to remove me, he
originally agreed in writing to give me 10% of the company if I remain
as a director, plus a £350,000 bonus in 2 years time or 10% of the
companies profit. As he now has all the work and designs I did, he
could avoid these commitments if I resign from the company.
However, the owner also signed an agreement which stated that loss of
office would receive compensation of £50,000 providing that I was not
incompetent, also that if I resigned within 2 years, compensation
would be forfeit. Additionally he agreed in writing that I would be
paid a separate fee of £25/hour for 20 hours/week for integrating the
IT side of the company. He has never paid me anything for this work
and the fees amount to £16,000 over the 8 month period.
Everybody employed on this project was paid either a basic salary or
not at all, with the promise that payment arrears and other great
benefits would come when the project was completed.
My question is : I would like someone to comment on my position and
what I need to do if they invoke the section 303 clause. I believe I
am entitled to something. What happens at these meetings/tribunals.

Certainly, the Shareholders are entitled to remove a director by
giving him due notice.

However, the Director could be entitled to compensation, as specified
in the written agreement.

I guess that you would have a case to argue in court but I would
suggest that you go to arbitration, as a first resort.

Maybe ACAS or the Industrial Tribunals Board should be your first port
of call. Either or both will certainly give you some good advice. They
work closely together.

Good Luck!

One thing I have done successfully in the past, is to involve the
'oppositions' solicitors.

While they have to act in their client's interest, they are not always
happy participating in blatant skulduggery.

It is also satisfying pumping up the oppositions fees.

It sounds to me as if you are definitely owed £16,000 and that £50,000
termination agreement sounds very interesting.
You would be mad to resign your directorship under the circumstances.

As Probono pointed out, he can remove you as a director, but as far as
I know he cannot force you to sell back your shareholding. He could of
course 'sell' the company to another one, which would result in you
holding 1% of nothing.

Under certain circumstances minority shareholders can be compelled to
sell their shares, but I'm pretty sure that is only in the case of a
company sale.

My inclination would be to build a dossier, photocopy it and send it
with a covering letter to his solicitors. If they reckon that you have
a strong case then they will probably advise him to settle. The
rationale being that if he loses, then they will certainly lose his
business.

You would also be well advized to book a meeting with your local DTI
Business Centre. I had a legal problem and received spectacularly good
advice - highly unconventonal and eminently practical.

Your £16,000 is too big for the Small Claims Court, which is a pity.

Regardless, your opponent's solicitors probably do not know the whole
story, if you set out your case with clear evidence, then at worst you
will have the satisfaction of knowing that they are charging their
client £120 per hour for reading it.

Incidentally, my guess is that the guy got cold feet at the last
minute because he felt he had lost control and reckoned that he was
involved in something beyond his grasp.
It sounds like something happened, perhaps in other parts of his
business, or perhaps something he heard about dot com stuff, rather
than an attempt to rip you off.

As such, if you appear calm and extremely reasonable, then things
could work out rather well - he might just hand you his 98% to see
whether you can hack it, but it is more likely that he'll give you 51%
and get a lien on your house.

Sorry, Jerry (frde-ga), but what you have proposed is decidedly a high
risk strategy. Great, if it works but ...

A chap I know was so sure of winning a case that he strung things out
and (against my advice) refused to get involved in a round table meet.

He lost! And the judge decided he had to pay all the costs. He lost
£75,000 and had to re-mortgage his home.

Going to court is always a lottery. Better to seek arbitration from
the word Go. Hence you should talk to ACAS - HELPLINE 08457 47 47 47

They are VERY good and they will move much faster, too. 

http://www.acas.org.uk/

HELPLINE 08457 47 47 47 

However, Jerry, your recommendation to compile a dossier, etc. is TOP CLASS.

I hate to disagree with anyone who's wise and wealthy (like you) but What the Hell?

All the Best to you Both

Bryan

@Probo, 

I have nothing but respect for you.

Also I have advised minimal legal fees

Thanks probonopublico-ga and frde-ga, you both make good sense and
have understood the situation perfectly. I will follow up your
pointers.
The cold feet idea is probable as the project was way over the owners
head. However, I hear he is recruiting again so I think that although
it wasn't planned, the idea of starting up again fell into his lap so
to speak.
Even if he pays everything he owes he will be much better off rid of
everybody, I think he can stand his reputation being the pitts around
here.
For me, it seems arbitration is the best bet. thanks