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I’ve been working as an employee for the family company that I was supposed to inherit. Despite dedicating my life to the company, that promise wasn’t followed through. Could I pursue a claim despite being paid a salary?
Mark Keeley, partner and joint head of private client services at law firm Freeths, says the commitment relatives put into the family business can sometimes be motivated by the expectation that the company will be theirs one day. If this isn’t reflected in the will, it can be very painful.
In some circumstances, where a promise or assurance has been made but not carried out, the court has the power to step in to rectify the situation under what is known as proprietary estoppel.
In cases like this it’s not always easy to identify what would have happened if these promises had not been made, particularly if those who had expected to inherit the business have benefited from its success along the way. In your case you took a salary from the company so this will be one of the considerations for a judge.
One case that may be of interest is that of Winter vs Winter (2023). Albert and his wife Brenda purchased a farm in 1964. Their sons Richard, Philip and Adrian worked in the business from a young age and were told they were “working for their futures” and that they would be treated equally. In 1988, a partnership agreement was drawn up providing each family member with a fifth of the business. When Brenda died in 2001, her share passed equally between her husband and sons.
In addition to being partners, the sons received salaries and, by 2015, Richard and Adrian each received annual gross earnings of about £100,000. In addition, their outgoings were paid by the business and they each had company cars, free holidays and subsided rent.
Following Brenda’s death, the business was incorporated. Albert became far closer to Philip, who had been a great emotional support to him but whose part of the business was lossmaking. Albert made a will in 2015 leaving his 25 per cent shareholding solely to Philip so that on his death, Philip would own 50 per cent of the business, with Richard and Adrian each taking 25 per cent.
But what about the promise to treat the sons equally? They all dedicated their lives to the family business, but they had also benefited handsomely along the way. The judge found that despite Richard and Adrian having benefited, they had also suffered financially. For several years, the profits had been reinvested into the business for future benefit, rather than being drawn down or paid as dividends.
The judge was also persuaded by the sons’ dedication to the business, having built their lives on the promise that the business would ultimately be passed to them equally.
The promises were upheld and the business divided equally between the three sons. You may be lucky and find that the judge finds the same in your case and upholds your right to inherit.
My ex is also my boss. How do we keep our personal and business lives separate?
My ex-husband is also my boss, and I’m worried about how our divorce will affect my job, as he has more sway in the company — how do we keep our personal and business lives separate so it doesn’t impact me, and vitally my financial situation?
Sue Ellingham, senior associate at Ashfords, says the adage “don’t mix business with pleasure” will ring a bell with anyone going through a divorce when the person they are divorcing is also their boss. It certainly means you will have more to think about during the process.
Yours is a delicate situation and the end result will depend on a number of factors. If you are both employees of a company, your employment rights and contractual terms should not be affected by your divorce. As your boss, your ex-husband will need to be particularly mindful of how you are treated at work to avoid potential employment tribunals. In the event of any difficulties you should seek specialist advice from an employment lawyer.
If the business is owned and run by the family, including you and your ex-husband, it may be that for the future prospects of the company — and your wellbeing — that you choose to do a deal where there is a trade off and you receive a greater share of the other assets of the marriage.
Our next question
My partner broke up with me, moved out, and is refusing to pay his share of the rent. We weren’t married and I can’t afford to cover both. Am I trapped by the rental contract or do I have options?
How you resolve the issue will depend on how much acrimony there is in your relationship, the financial resources you and your husband have, your future income and capital needs and how your needs will be met.
These factors will be based on all your circumstances, including the size and set up of the company, the terms of your employment contract, the likely future working relationship you are going to be able to have and how easily it would be for you or your husband to obtain alternative employment of similar income.
Alternative dispute resolution methods are a good way to test what are likely to be disputed issues between you. There are a number of options available including Resolution Together, Collaborative Law, Mediation and Private Financial Dispute Resolution. Your first step however is to gather together all the relevant information to inform any conversation or decision around an eventual settlement.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com
