Issue with fellow director
Discussion
Myself and my fellow director setup a consultancy business a number of year ago. Like most business there are ups and downs.
However, it has become apparent recently that for some reason, the fellow director isn’t generating any or very little income for the business. Being a consultancy, charging clients for work undertaken is key and there are a number of productive hours that most employees should achieve.
The fellow directors monthly invoices were generally starting to look on the low side (despite including time for a number of employees). When asked why, there was always an excuse i.e. waiting for the order for additional work, waiting for final sign off of work. However, I started to become more and more suspicious so started reviewing the productivity of all employees but there is a gap for his invoices, as he keeps them on his local computer. I’ve asked him to update his invoices to my review spreadsheet and guess what, more excuses for not doing it.
There are probably a number of reasons, either he’s had no work so has been doing nothing and not chased clients for work (we have turned work down during this period as the understanding was we were too busy). Or he’s been doing work but not agreeing any costs with clients and then not invoicing them. He says some of his time has been managing a number of employees but that’s not a full time job. Myself, and the employees that I manage, have been nearly hitting our target hours on a monthly basis.
The impact of him not invoicing any time means we go from making around £6/7k extra profit a month (on top of the dividends already paid to the directors) to just about breaking even.
This has had a significant impact upon my mental health with not sleeping, stress, anxiety, etc. for around 6-8 weeks now, ending up in me going to see my GP and being put on medication. My GP has suggested I go on sick leave for a period of time but even a month or two, with my fellow directors lack of generating income, will probably result in the business ceasing to trade.
I’m giving him once last chance this week to update his invoice totals and confirm what he’s been doing before I challenge him with the evidence I have. The outcome of this will be how he plans to correct his actions going forward.
However, it has become apparent recently that for some reason, the fellow director isn’t generating any or very little income for the business. Being a consultancy, charging clients for work undertaken is key and there are a number of productive hours that most employees should achieve.
The fellow directors monthly invoices were generally starting to look on the low side (despite including time for a number of employees). When asked why, there was always an excuse i.e. waiting for the order for additional work, waiting for final sign off of work. However, I started to become more and more suspicious so started reviewing the productivity of all employees but there is a gap for his invoices, as he keeps them on his local computer. I’ve asked him to update his invoices to my review spreadsheet and guess what, more excuses for not doing it.
There are probably a number of reasons, either he’s had no work so has been doing nothing and not chased clients for work (we have turned work down during this period as the understanding was we were too busy). Or he’s been doing work but not agreeing any costs with clients and then not invoicing them. He says some of his time has been managing a number of employees but that’s not a full time job. Myself, and the employees that I manage, have been nearly hitting our target hours on a monthly basis.
The impact of him not invoicing any time means we go from making around £6/7k extra profit a month (on top of the dividends already paid to the directors) to just about breaking even.
This has had a significant impact upon my mental health with not sleeping, stress, anxiety, etc. for around 6-8 weeks now, ending up in me going to see my GP and being put on medication. My GP has suggested I go on sick leave for a period of time but even a month or two, with my fellow directors lack of generating income, will probably result in the business ceasing to trade.
I’m giving him once last chance this week to update his invoice totals and confirm what he’s been doing before I challenge him with the evidence I have. The outcome of this will be how he plans to correct his actions going forward.
Edited by Powerkiter on Sunday 13th November 17:01
Edited by Powerkiter on Sunday 13th November 17:02
If you are 50/50 on shares and there isn’t anything in the articles for how to deal with this you need to go very carefully as he can make things a lot harder for you than you can for him.
I hope you at least have a buyout clause in there to fall back on as it sounds like he wants / needs out, or has lost interest.
I hope you at least have a buyout clause in there to fall back on as it sounds like he wants / needs out, or has lost interest.
I have a vague recollection of there not being a shareholder agreement, as this was requested during my divorce several years ago. I’ll have a look through my divorce paperwork.
Might be me being paranoid, but I’m starting to feel as though he feels he can just sit there at home doing the bare minimum of work, let me and the other employees do all the work and he takes home a nice salary/pension contribution every month knowing there’s not much that can be done.
Following divorce I wouldn’t be in a financial position to buy him out.
Might be me being paranoid, but I’m starting to feel as though he feels he can just sit there at home doing the bare minimum of work, let me and the other employees do all the work and he takes home a nice salary/pension contribution every month knowing there’s not much that can be done.
Following divorce I wouldn’t be in a financial position to buy him out.
Edited by Powerkiter on Sunday 13th November 19:29
I always say being in a business partnership is very much like a marriage. I’d suggest that you arrange to get together f2f and have a coffee/lunch and discuss your concerns openly together. There will be a reason as to why what is happening is happening and perhaps he/she is also struggling mentally, or has something else going on that is affecting their ability to perform. Perhaps you both need to review how you are rewarded through the business and make it sustainable and equitable?
Falling out will result in nobody except lawyers winning (and without a shareholders agreement your options aren’t great), and it will take your mental health downwards as well as taking up a lot of time and focus away from the business.
Falling out will result in nobody except lawyers winning (and without a shareholders agreement your options aren’t great), and it will take your mental health downwards as well as taking up a lot of time and focus away from the business.
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