How to deal with company director decision?

I am hoping to get some advice on this. I am currently self-employed but will be set up as a ltd company come Jan 1st. I will be the primary shareholder and a proprietary director. I will have one other director with me, however I am trying to weigh the benefits (good or bad) of whether I should make this person a proprietary director or not.

As a proprietary director I know he will lose his paye credit, however as such the company will not be liable for paying 10.75% prsi on his salary. In this case I will increase his salary to reflect any loss due to losing the paye credit. Now, this seems like the ideal situation. However from his perspective, I am wondering if I am unaware of any other details that may adversely affect him, if I make him a proprietary director as opposed to a director who is paid as normal under class A and holds less then 15% in shares.

Any advice or information relating to this will be appreciated. I am as much trying to educate myself on this as well as make the right decision on how his directorship is handled.

You probably have very good reasons for wanting to make this person a proprietary director of your company.

From someone who has been involved with an assortment of companies and boardrooms throughout my career so far, I would think long and hard about giving away capital in my company.

There are lots of ways of rewarding loyal and valuable staff members and viable ways of sharing the rewards of a successful business without taking this ultimate step.

I would rather focus on a joint management approach than a fellow shareholder one.

Thank you for your reply. I agree with your point, however in my situation I spend alot of time out of the country and therefore need to have a resident director in place.

In view of the fact that I have no option but to use this key employee as a director, I am still hoping for advice on my original question as to whether I should make him Proprietary or not?

Am I right in thinking as a proprietary director his future social welfare and pension benefits will be adversely affected?

That's correct

Persons paying class S contributions (Proprietary directors and self employed) are not entitled to Retirement pension, Disability benefit, Invalidity benefit or unemployment benefit.

They are however entitled to old age contributory pension and widows/ widowers contributory pension.

The retirement pension is payable at age 65 whereas the old age contributory pension is only payable at age 66