How to deal with an ex-employee who still has shares in the company

CASE STUDY QUESTION >>>

I have been running my own bookkeeping business for the past 11 years. Last year I made one of my employees a Director and gave her 10% of the shares in the Company.  The arrangement was that she would run the office and I would work from home.

She has just resigned as a director.  She is moving to my biggest local competitor and their negotiations have been going on for the past 3 weeks. She owes the business £2,255.36 as a loan from the Company to her to pay for various personal expenses and items.

She is asking for a copy of the Company books and records. She has also asked how much was declared as dividends for the past company accounting year – I hadn’t planned on declaring any.  She is also asking me if I plan to purchase her shares in the business.

Therefore my questions are:

1. Has she any rights to see the books etc. now that she has left the business, other than the statutory ones that are filed at Companies House?

2. Would she have given up her shares in the business (10%) when she resigned?

3. Do I have to pay her anything?

ANSWER >>>

Has she any rights to see the books etc. now that she has left the business, other than the statutory ones that are filed at Companies House?

No – she has the right to see the management accounts and related information if she was a director, but she has resigned and is not a director anymore. It is reasonable for her to ask how her directors loan has been calculated – e.g. to ask for supporting documents or records (if any) to understand the final total that she owes the Company. The likely reason that she is asking you about if any dividends were declared last year is because she is a shareholder, and shareholders are entitled to dividends if any are declared.

Would she have given up her share in the business (10%) when she resigned?

No. Shares do not automatically return to the company when a director resigns. She will continue to hold her shares until she transfers them back to the business – which is why she is asking about whether you have any intention to re-purchase her shares.

Do I have to pay her anything?

Do you mean for her shares? You could leave her as minority shareholder. There is no obligation on you to have to purchase her shares if she leaves the Company. So, no – you don’t have to. But you may want to make her an offer for her shares to get rid of her from the Company.