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2 Shareholding Director to Shareholder

20 Mar, 2018 14:34

I have been asked to help an organisation remove a company shareholder from the Board of Directors, to be a shareholding employee. However, their Shareholding agreement does not cover this (e.g. what % of dividend is for being a just a shareholder, what % dividend is for a Director who sits on the Board). The individual concerned is receptive to this however I am looking for guidance with regards to structuring pay in such circumstances. Does anyone have experience of a similar situation? A side from the contractual issues, I need to establish:

- payment for Shareholding Directors who sit on the Board

- Shareholders who do not sit on the Board

- Directors with no share that sit on the Board ( just salary as per any other job?)

I am thinking this is just down to negotiation and what is reasonable in the circumstances. Any advice would be appreciated.

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Keith | 0 Posts

20 Mar, 2018 15:41

Unless I am missing something then generally the dividend is simply for being a shareholder (although do recognise the potential tax advantages of paying dividends) and unless your articles are particularly sophisticated then you might struggle to pay different shareholdings different per share dividends.

But at its simplest level you separate out the two issues and simply do a market comparison to work out what the correct salary should be for a X Manager (who happens incidentally to be a shareholder)
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Ray | 0 Posts

20 Mar, 2018 15:51

In reply to Keith:
Agree with Keith, unless you have special subcategries of shares with reduced rights to dividends or no right at all - rare, but this does exist - then keep the two issues separate.
The one area of ambiguity in the post concerns the word "director", which is often used (inaccurately) to mean a senior manager on the company (but not necessarily a Board member) , as opposed or a Board member who carries the legal responsibilities of being a board member (but who may be external to the company and therefor non-executive in terms of the company's day to day activities). In tis latter case of a non-exec, remuneration would usually be via Board fees of director's fees as opposed to a "salary".
Maybe some clarification would help...
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