QLD Business Partner Leaving - My Rights as Director?

Hi YLW,

Are you planning to wind up the company? If not, you should not be giving out company assets to remunerate the leaving director. What does your company constitution (or articles of association) say about director remuneration? What does it say about exit packages when a director leaves? Essentially, where a director leaves, they are entitled to the any outstanding remuneration (i.e. wages) paid up to their day of departure and any exit packages that is due under the constitution or as approved by the directors (or the shareholders) upon passing of a resolution. In this case, you will need to look to your constitution to see what the procedure is for passing such. If the director wishes to step down as a director, does he also wish to sell his shares? Further, have a look at the Corporations Act and see if there is a requirement that there must be at least two directors acting on the board.

 

Hi YLW,

As far as my understanding goes, if there is no stipulated exit package, then it is within the discretion of the company, through its shareholders/board of directors (depending on your company constitution), whether to provide the exiting director with any "golden handshake". If it is not provided for in their director contracts, then it is not mandatory. The director would be entitled to their wages as accumulated and falling due on their exit day (i.e. wages / 365 days x days worked). The director would also be entitled to any reimbursement for costs and expenses and any other benefits they are entitled to under the director's contract and the company constitution.

As a director, you must act in the best interests of the company. This means, acting in the interests of the shareholders as a whole. Where the shareholders agree to offer a loan rather than cash buy-back in exchange for the shares, then the directors would be able to offer that to the exiting director. At the end of the day, it is whatever the existing director and the company decides. Any offers extended by the company should be accompanied by a board and/or member's resolution (again, depending on your company constitution).

I am assuming this is a private company incorporated in Australia.

 

Is there a shareholders agreement which you all signed at the outset? If so, review it along with the company constitution for details as to the relevant rights and procedures

 

Ans: 1. No
2. Possibly sue them. Without board approval it may be theft.

Difficult situation for you. The law doesn't care if you do 90% of the work or 10%. It will look at wages, shareholding, shareholder agreements and the company constitution.

Shareholder agreement is the important document for you, followed by the company constitution, though I suspect you don't have a shareholder agreement. Was anything discussed/put in writing at the time the company was set up about what happens when a party wants to sell shares?

It may be that them taking cash in return for giving you 50% of the company is fair value. Their shares are only worth what someone else is willing to pay.