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Ask the Experts – July 2012

SONIO SINGH – PARTNER IN THE CORPORATE DEPARTMENT….

Q: I am a majority shareholder in a company that has a minority shareholder holding a small number of shares who has been untraceable for many years. On the recommendation of the Directors, we are seeking to ensure our Members Register is cleaned up (with a view to disposal) by re-purchasing and/or cancelling the shares. What is the best way forward?

A: Following the codification of certain common law principles in the Companies Act 2006, it is important that a majority shareholder proceeds carefully so as to ensure that the rights of a minority shareholder are not prejudiced in any way.  Whilst shareholder actions of this type are relatively expensive, it is essential that the provisions of the company’s Shareholders Agreement (if one is actually in place) are followed carefully along with the relevant Articles of Association.  These documents (read in conjunction with each other) govern the procedure in respect of acquiring the shares of an untraceable shareholder. 

It is common for there to be provision in the Articles of Association for the forfeiture/sale of such shares.  If the Articles of Association are very basic, they can be amended (primarily by way of written resolution of the shareholders) to include share forfeiture provisions.

The relevant procedure in the Articles of Association usually involves a company carrying out a share buy-back before then cancelling the shares of the minority shareholder.  This is usually much more straightforward than shares being removed by way of a reduction in capital.  Obviously, the relevant conditions for a share buy-back out of profits available for dividends must be satisfied.  These conditions include the company having power in its Articles to repurchase the shares, the passing of a written resolution by the members and there being sufficient distributable profits in the Company.

ANNA BUNTING – PARTNER IN THE EMPLOYMENT DEPARTMENT….

Q: It has been brought to my attention that one of my employees has been posting comments about the company on Facebook. Although this is being done in her own time I am concerned about the damage that this could cause to the company. Can I dismiss the employee?

A: The growing popularity of social media creates a number of difficult issues for employers, and this is one of them. For a long time it has been a well established principle that an employee’s use of their personal time should be of no concern to the employer. Disciplinary action for conduct outside of work is consequently difficult to justify. However, there is a growing body of caselaw which suggests that in some cases disciplinary action can be fair if the employer can demonstrate that there is actual or likely damage to the business, its reputation or its relationships with customers. It may be more difficult to justify disciplining on the basis of a general grumble than it would if the business and its products and services were specifically criticised in the public domain.

As the usual unfair dismissal principles will apply to any dismissal, before taking this step, an employer should consider the extent to which the employee was aware that comments of this nature would be considered as gross misconduct. It is therefore vital to have a well drafted social media policy outlining these rules and ensure that it is enforced across the board to show consistency. If there are no such rules then summary dismissal for a first offence may be considered harsh and is likely to be risky. I would therefore recommend you take specific legal advice from an employment specialist before doing so. You may decide to speak to her informally but to issue a social media policy to all staff in the meantime highlighting that conduct of this nature is prohibited. This should help put you in a stronger position to discipline on the next occasion.

Q: Our longest serving member of staff turns 67 in September. Our standard contract of employment provides that our normal retirement age is 65 but we didn’t ask him to leave at that time because he is a good employee and it suited both parties for him to continue working. Work has started to dry up recently and we need to make cuts. I presume that we can now just give him notice as it will be cheaper to retire him than to make someone redundant?

A: It used to be relatively straightforward to retire employees at 65 but since the introduction of regulations to prohibit age discrimination in 2006 – and the subsequent repeal of the default retirement age of 65 in 2011 – I am afraid the issue is more complicated.

Retirement is considered as potential age discrimination given that it is a dismissal on the grounds of an employee’s age. Employers are not necessarily prohibited from having a policy of retiring employees at a fixed age but any policy must be objectively justified to avoid claims of unfair dismissal and age discrimination in respect of any dismissal in reliance on that policy. You must be able to show that the retirement age is a proportionate means of achieving a legitimate business aim. Examples might be that it helps workforce planning and/or to give career progression opportunities for more junior staff.

In your situation, even if you can justify the fixed retirement age I would be particularly concerned as to whether you can rely on this given that you have allowed him to work longer. As discrimination claims can be extremely costly, I suggest that you take specific advice from a solicitor who specialises in employment law to explore your options before taking the matter any further. If you believe the employee may be happy to retire then there may be scope to reach some form agreed departure with the added protection of a compromise agreement.

ANITA SHEPHERD – FAMILY LAW SOLICITOR….

Q: I am unmarried and have lived with my partner for some 10 years.  Our home is owned in my partner’s sole name although I have helped out with contributing to living expenses.  Are there any claims for financial provision I can make against my partner?

A: As an unmarried cohabitant your partner has no legal obligation to provide financial support for you and therefore you would not be able to apply for maintenance payments, pension sharing or for a share of your partner’s capital assets.  Such rights are only afforded by legislation to married couples or civil partners.  In respect to your home, which is owned in your partners sole name, I would recommend you consult a family solicitor to obtain detailed advice as to whether you have a case for making a claim against the equity in the property provided you are able to establish a beneficial interest by relying on trust principles i.e. express, implied, resulting or constructive.  Such disputed claims are brought in the County or High Court under the Trusts of Land and Appointment of Trustees Act 1996. You will need to provide your solicitor with detailed information of your contributions to the property – with documentary evidence if available – along with comprehensive details as to any oral or written agreements as to your interest or otherwise in the property.  It is only after careful consideration of this information will a solicitor be able to advise if you have a case.

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