Readers will recall that John and Jack were running their shoe manufacturers, "Such Cobblers," after the death of George who was Production Director and a one third shareholder. Mildred, George's rather blousy wife, had wanted to take his seat on the Board but Jack, in particular, had objected. John and Jack also had to change their remuneration policy from low salary and high dividends to high salary. This was to avoid paying Mildred because she did not contribute to the running of the business. Mildred subsequently threatened to take them to Court unless they reinstated the previous dividend policy.
What follows is best read in the style of Sir Terry Wogan and the “Janet and John” stories from his radio programme.
John had just been released from the Home for Battered Husbands and had returned to work. He saw Jack in the boardroom sitting with his head in his hands.
“What’s the matter, Jack?” he asked. Jack slowly looked up. “I have been talking with our solicitors, Billem and Hard, and Mr. Billem says Mildred has a case.”
“Oh dear,” said John.
“We haven’t got the money to buy her out and the bank won’t lend it to us as we already have an overdraft and our financial performance has dropped significantly since George’s death,” continued Jack.
“What are we going to do?” asked John.
“Well, as I see it, we have limited choices. We could reinstate the dividends, but our profits have dropped like a stone. We could try and reason with Mildred and perhaps arrange to buy her out over a number of years. Alternatively, we could just call in the receiver and wind up the business.”
“If we did call in the receiver, we could then use our pensions to borrow money to buy-back the machines and start again,” said John.
Jack stepped back in amazement. “What a cracking idea. I think that last bang on the head from Janet has done you the world of good.”
“It really hurt.” John winced as he recalled the impact.
“Where will that leave Mildred?” John asked.
Jack twirled the end of his waxed moustache. “Up the proverbial creek without a paddle.” A demonic laugh followed.
After several months Jack and John were able to buy back their machines and start again but they had lost their customer base and struggled to get back to a viable business. Poor Mildred had to downsize her home and take a part time job at the local supermarket to make ends meet, and feed her puppies.
And all because the directors did not follow the advice from the chap at Rutherford Hughes and put in place shareholder protection and key man insurance! If they had, the bank loan would have been cleared and Jack and John would have had the funds to buy-out Mildred. And they all would have lived happily ever after. The end.
Peter Rutherford is a Director at Rutherford Hughes Ltd. He can be contacted on 0191 229 9600 peter.rutherford@rutherfordhughes.com
