4 ms·
Nope, a contract wouldn't help if he did an asset sale, gave himself a dividend, and then shut down shop. They should get the funds placed in escrow.
by a5seo 15y ago
Nope, a contract wouldn't help if he did an asset sale, gave himself a dividend, and then shut down shop.
They should get the funds placed in escrow.
- A1kmm 15y agoCompany directors generally have a fiduciary duty to creditors to ensure that a company is solvent. Paying a dividend knowing that it would result in the company being unable to pay its liabilities is therefore a breach of that fiduciary duty. However, even if there is a contract I bet it allows staff to be made redundant if the company decides not to do something without getting paid out, so that would be a possible loophole.
- pavel_lishin 15y agoA smart employee would make sure that such a contingency was added to the contract; e.g., if you sell the company at two weeks before my five-year anniversary, I get the pro-rated bonus.
- sethg 15y agoWhen the startup I worked for was acquired, I got a retention bonus dangled in front of me as an incentive to stick around; one of the terms of the contract is that if I am laid off or if the company has a change of control, then the entire bonus gets paid off immediately. Of course, I am confident that no matter what happens, the acquiring company will have the cash lying around to pay off my bonus. A small consulting firm... not so much. Regardless of the contract terms, the firm can always declare bankruptcy, in which case the employees expecting their $50K payout can stand in line with all the other creditors. Yeah, escrow sounds like a good idea for a case like this. (Would escrow be enough to shield the money in case of bankruptcy? My Google-fu is not helping.)