Director or Equity stake

Hi,

I have been helping out a small / medium sized privately owned company for the last two years with a number of managment / productivity issues, purely on a personal capacity ( I have known these people for many years). The company is family owned business & is in the manufactuirng sector with a T/O of €40M in 2008 and are on target for a €2M profit - this was not the case two years ago.

In my "day job", I currently work full time with a multinational company, also in the manufacturing sector. I have been with this company for 24 years (currently aged 50), my current job focuses mainly on gaining production efficiencies & I have had a lot of international experience in this area within my current job.

Now, I have been approached by the MD of the private company I have been helping out, who has offered my a very significant salary & conditions to join his company and also to become a director or alternatively accept an agreed share holding in the company. The basic package on offer is more than twice my current package - that bit is straight forward, but in relation to becoing a director in the company or taking a shareholding - I don't know how I should evaluate this option.

I have a number of issues re. which is the best option : Director or Share holding, but if I look at it just from two perspectives to start with : (a). Taxation and (b). Pension - what are the main differences / benefits between the two options ?


Becoming a director scares me somewhat & as I'am aware of the liabilities that come with such a position !

Is there a better option I could propose ? The whole offer is very attractive to me & may allow me retire before 65 ( I hope).

Very much appreciate your comments.

Regards,

J.P.

It sounds a bit odd that they would ask you to become a director or a shareholder, normally its become a director and heres a shareholding.

Becoming a director with more than 15% shareholding means you move to class S prsi with the loss of social welfare entitlements that go with it as well as losing the paye credit

A minority shareholding in a private company doesnt hold much value unless the business is likely to be sold on or it pays a good dividend at the end of the year, which is taxable of course.

If the company paid a 5% dividend on profits you would get €2m/5%/your shareholding, so it depends on what they are offering.

You would need to look at the share rights to the shares they are offering. Most of the classes of shares which are offered to employee's have very limited or no rights, so may just be lip service.

There is no real benefit to being a Director only, other than taking up additional responsibilities with CRO, etc. Make sure you examine the financial position of the company in depth before you agree to be a Director.

Anyone can be a Director, but it is the shareholders(members) that own the company, depending on the rights attaching to each class of shares.

I always laugh when people tell me they are a "Director" as if they are very important - I know the reality.