The Words Unsaid
by Nigel Gordon
Chapter 12
"I think your father suspects something," Dale Waters stated.
"What," asked Jonathan, "is there for him to suspect? You are making some adjustments to the running of the business; that is just prudence given the current commercial environment. Anyway, the old boy's senile. He's spending a fortune on good for nothings and layabouts like my son. He's got no interest in the works."
"Then why," queried Dale, "has he been in to the works three times in the last week?"
"He's what?"
"He's been into the works at least three times in the last week. He was there on Monday when I arrived. Only knew he was there because that car of his was in the car park. Had to get one of the office boys to go down and look for him. Turned out he was in the pattern shop chatting to a couple of the pattern makers."
"That sounds like Dad, living in the past. Probably thinks he still runs the place."
"That's the thing, he never comes and talks to us, at least not often. The last time he really talked to us other than asking the odd question was over a year ago," Dale commented, looking out of the café windows to the M1 beyond. They had agreed to meet at the Leicester Forest East service area. Both had thought it was best not to be seen together in Sheffield but Dale had to be back for his son's football match in the afternoon, so an hour's drive was the maximum for him.
" Look, Dale, it's not going to matter in just a couple more weeks. We've exchanged contracts on the last parcel of land and we complete in twenty-three days. Once we've completed we can go ahead with the takeover. Everything will be in place."
"What if your father refuses to sell his holding?"
"He won't be able to. Bettridge's is bust, you've made sure of that. Dad's personally guaranteed the overdraft. Even he can't come up with five-million overnight," Jonathan stated. "He will have to sell, actually he will come out of it in pocket given what Taiosheti are paying. He will make a tidy packet and Taiosheti will sell us the site for a song." Dale looked at him doubtfully. "Well, it's no use to them, is it?" Jonathan asked rhetorically.
It took Mark a few days to get all the information he needed so he could decide what action to take. A phone call to Marsha had resulted in the delivery of a USB memory stick with all the current Sage backups and the last five years' accounts. A firm of accountants, who Mark had used for years, but who were no longer auditors to the company, sent one of their bright young women over to Mark's to spend an afternoon with him looking at the information.
"Well?" Mark asked, after she had spent the better part of two hours putting figures into a spreadsheet.
"The company is as good as bust!" was her response.
"Can you explain that, Miss Godwyn?"
"Call me Ruth, please, Mr Wainwright, otherwise we are going to get very stuck on formality."
"OK, but you must call me Mark."
"I will, though my boss will probably kill me but at least he won't sack me."
"Why's that, Ruth?"
"Because he knows I am the best forensic accountant he's got, and I'm his daughter."
"His daughter?"
"You wondering about my surname. My parents never married. They had a relationship that broke up even before mummy knew I was on the way. Daddy has been good about it, though. He's accepted his responsibilities and always been there for me as a father when I have wanted one. In some ways I think I have probably been better off than a lot of my friends whose fathers were married to their mothers. I'd often get the feeling that their parents wished they had not had the children. I never had that problem.
"But enough of me, let's get to your problem. Essentially, the company is being skimmed, it has been for at least the last three years, possibly for as much as five years. You are right in saying that turnover and profits are up but both have been obtained by some questionable accounting practices."
"Like what?" Mark asked.
"For a start, quite a bit of land has been sold off. Those sales should have been shown as capital disposals and the funds from them put into the reserves. Instead, they have been put through as trading activities and the funds put into the normal trading accounts. In fact, all the increase in turnover plus a bit more for the last three years has come from disposal of capital assets of one type or another. How they managed to get this past the accountants I don't know.
"Then, the stock values do not make sense. I see orders completed which will have depleted stock and no sign of replacement orders but the stock levels have been maintained. I suspect they have just carried forward stock figures rather than doing a stock check. My opinion is that the stock figures shown in the company are overvalued, probably by quite an amount.
"Finally, though this is a management rather than an accounting issue, there has been a massive cut back in re-investment and R&D, and, as a result, the level of development costs and depreciation being charged through has dropped, so profits have gone up. Whilst increasing current profits it weakens the long-term viability of the business."
"So the company is in a mess?"
" No, Mark, I would say it has gone a bit further than that—it is completely fucked up thanks to the directors. "
" I'll sack the fucking lot of them!" Mark exclaimed and then apologised to Ruth for his language.
"No need, Mark. I can think of some stronger language I would be quite happy to use about them. Sacking them, though, may not be a good idea," Ruth replied.
"Why not? Surely what they have done is illegal?"
"As to the legal status of their actions, that is questionable. I am not sure you could actually show fraud Mark, which would give you grounds for dismissal. Negligence, yes, and breach of accounting rules, yes, but fraud? Probably not. You see all the funds were reported, just not put in the right place.
"If that had resulted in an underpaying of tax, maybe Her Majesty's Inspectorate of Revenue and Customs might have been interested. However, what they did probably resulted in an overpayment of taxes, as some allowances were not claimed.
"Also, even though you are the Chairman, you do not have the right to sack them, only to remove them from executive positions." Mark looked at here questioningly.
" The company was established over a hundred years ago and its Articles of Association were last updated in the 1970s. I think that is when you became a director. It has old-style articles. As such, directors can only be removed from office by a General Meeting of the company.
"In addition," she continued, opening a folder of papers, "all the current directors have very strong contracts that give them substantial rights to compensation if they are fired. You would be looking at the equivalent of five years' salary and bonuses."
"Who the hell set that up?" Mark asked.
"You did. At least you signed off on it, at the Annual General Meeting a couple of years ago."
Mark looked at Ruth with a look of incredulity upon his face.
"It is no use looking like that," she continued. "I admit it is in the small print of the director's salary review motion, but it is there and I have no doubt they have included it in their contracts. I suppose they got you, as chairman, to sign new contracts for them a couple of years ago?"
"They did, said they had to comply with employment law changes. How did you know?"
"That Marsha of yours is very efficient. She sent over not only the backups of the accounts but also all the board and company meeting minutes and documents."
"So I'm stuck with them as directors and all I can do is sit here and watch them run my business into the ground?"
"Yes, you are stuck with them as directors, but as to letting them run your business into the ground; that is another matter." Mark looked at Ruth blankly wondering what she was on about. "Look, Mark, the compensation issue only triggers if they are sacked as directors, now…"
For the next twenty minutes Ruth explained the difference between being a director and an executive director and the powers that were vested into the position of Chairman of Betteridge's.
"Right, could I retain your services for the next few weeks? I might need you for a month at least, maybe a bit longer." Mark stated.
"I'm not sure that you will actually need me for all that time but I am sure my firm can supply the staff you need. When will you need them from?"
"Next Monday, say here at about seven a.m."
"They'll be here, Mark. I think you might need me initially and a couple of good auditors. Will that suffice, do you think?"
"Probably, as we will have Marsha."
The following day, James, Mark's solicitor, sat with Mark at the kitchen table as Mark told him what he wanted done.
"You know, Mark, this is highly irregular. If you want to get rid of the board you should request a call of an Extraordinary General Meeting and vote them out there and then."
"Yes, James, but that would take at least three weeks, and if we had to force an EGM it would take longer, almost two months. Can you imagine what would happen to the business in two months, with that lot running it as they are now?
"I know this this is nasty and somewhat underhand but it is quick and effective. My father-in-law had that clause put into the articles for a reason, and I now know what that reason was. I'm just glad he did not have to use it whilst I was running the company."
James looked down and re-read the article in questions. "Any shareholder holding in excess of 50% of the shares may, at his discretion, appoint to the board directors to represent his interests. Such appointments shall be made as and when required without any notice of intent to make such appointments, the appointment to be held for such term as the shareholder may think appropriate."
"You agree that the term is plural, I can appoint more than one director?"
"Yes, Mark."
"And you agree that I do not have to give notice?"
"Yes, Mark."
"Right, just get a notification of appointment of directors under that clause typed up, and leave the names blank. I'll fill them in Monday morning. Also notices to the current directors ending their executive status." James knew better than argue with this client. He nodded and collected up the appropriate papers.
Mark's next meeting, though, was not a straightforward one. For a start he had to get Tim to drive him over to Derby on Friday morning to the premises of his company's main competitor, Mattashion's Precision Engineering. Paul was waiting for him by reception when they arrived.
"Hi, Uncle Mark," he greeted the old man, and then looked at Tim. "You must be Tim; I think you were twelve last time I saw you."
"Correct. I think your sister was trying to put an ice-cream down the back of my neck."
"Probably, knowing my sister. Look, I have reserved a meeting room on the ground floor. Thought it might be easier for you, Uncle Mark, than going up to my office — no lifts in here yet."
"Fine, though I could have made the office. I might be 75 but my legs are still working."
"OK, Uncle Mark," Paul responded, leading the way into the meeting room, "what is it you wanted to talk to me about?"
Mark seated himself at the meeting table, indicating to Tim that he should also take a seat. "Paul, I want to ask you to come back to Bettridge's. I need somebody who is family in there."
"Uncle Mark, two things: first, I'm not really family, am I, and Dale Waters and his cronies on the board made it quite clear they did not want me there. Basically, I was told to get out or be thrown out."
"You should have told me." Mark reproached him.
"You were out of it by that time. Anyway, Johnny was up representing the family, and he made it clear that the family position was that I was not part of the family and had no place in the company."
"Johnny was up?"
"Yes, he was coming up every three months or so after you left. He never attended board meetings but would meet with Dale and discuss the future of the company and how they were going break it up for the sell off." Mark issued a series of expletives and sunk back in his chair.
"You OK, Granddad?" Tim asked.
There was a pause before Mark replied. "Yes, Tim, I'm OK. I'm just a bit upset, but a few things are starting to make sense now."
"Like what?" Tim enquired.
"After your grandmother died your father got onto me about making an enduring power of attorney in case I was taken ill. There had been problems with some of your grandmother's things because I had not been able to act for her. I did put an enduring power of attorney in place, but appointed Joan to act, which really upset your father. I can understand why now."
Mark turned back to Paul. "Look Paul, as for not being part of the family, you are as much a part of the family as any of my other nieces or nephews, and anyway, my sister adopted you so legally you are part of my family. You are the only member of the family who took any interest in the family business. Not even your sister, who is a blood relative, wanted to be involved. The business is in a mess, and I have only just found out what is going on, and unless something is done fairly quickly to turn things around, there will be no company. I need somebody in there who understands the company and what it means. I can't do it. I'm too old, and also I have a great-grandson who takes up most of my time, so will you come back?"
"Uncle Mark, I would like to help, but things are not that simple. Look, I need to get George in, because there are some things I have to say which I can't without his permission." Paul got up and walked over to the side table, picked up the phone, and asked whoever answered to ask Mr Mattashion to come down to the ground floor meeting room.
A few minutes later George Mattashion came into the meeting room. His appearance shocked Mark. He knew George was a good eight years younger than himself, but he looked a lot older. Mark stood and offered his hand.
"George, it's been a long time," Mark commented.
"Yes, Mark, last time we met was at your wife's funeral. I presume you're here to coax your nephew back."
"That obvious, is it?"
"I know there are problems at Bettridge's. Businesses like ours do not train up apprentices to let them go. In the last six months we have picked up four lads who had completed training with your company but for whom you had no jobs." Mark was furious; an apprentice represented three or four years of training and a lot of money; they were the future of a company like Mark's. It was the specialist knowledge, the hints and tips, passed down from workman to workman, that were not found in any books that gave firms like Mark's an advantage.
"Look, Mark," George continued, "you know I have no family." Mark nodded. George's wife and son his only child had died in a car crash many years ago. "I saw what was happening at Bettridge's after you stepped down and damned well did not want the same to happen here. As you know, I made Paul a director here when he joined us." Again Mark nodded, he had thought that was the reason Paul had left Bettridge's, not knowing about what was going on. "What is not well known is I also gave him ten percent of the company. I have also agreed to a share transfer scheme with him by which he can buy my shares over time. In the last three years he has been with us he has acquired just over five percent of the company, which now gives him a fifteen percent holding."
Mark began to speak but George held up his hand.
"I've got cancer, Mark," George continued. "It's in remission at the moment but it will come back. If I am lucky I may have three to five years left, probably a lot less. At the end of this year I am retiring, and Paul will be named Managing Director. He will also get another block of shares, giving him twenty-five percent. I've arranged things so that when I die he'll be able to acquire sufficient shares from my estate, if he has not purchased them already, to give him control of the company. So, I do not want to lose Paul and I don't think he would want to go."
Mark could only agree. It was clear that George had seen what had happened with Mark's company and was not about to let it happen to his own. Unfortunately, that meant he had a good use for the one person that Mark really needed, and Mark sensed he was not about to let Paul go and also that Paul would not want to go. "Well, I suppose that it is then, I think we can take it as read, Paul, that you won't be coming over to Bettridge's."
"Sorry, Uncle, if you had asked a couple of years ago, maybe even a year ago, I would probably have jumped at the chance, but now – well I have just started this place going where I want it to go."
"So, I will have to look for another solution."
"How about a merger?" Tim suggested.
George looked at him questioningly. "A merger?"
"Look, I don't know much about the business, either of them," Tim explained, "but from what I have picked up over the years you are both specialists in very high-precision, low-volume engineering. Other than each other you have no real competition in the UK. Most of your competition is from overseas, is that correct?"
"Yes," Paul responded. "Actually, as far as the UK work is concerned, we are not that much in competition. Our mechanical engineering people are mostly working on aerospace engines, while Bettridge's people are mostly working in automotive engines. Yes, there is some overlap but not much. Even in the precision casting departments we tend to specialise in different ranges of alloys. In the past we actually have partnered on a few projects but that all ceased when Uncle Mark retired."
"So a merger could make sense?" Tim asked.
"Actually, I think it could make a lot of sense," George commented. "In fact, it could work out quite well all round. What do you think, Mark?"
The four of them spent the next couple of hours discussing the option. George then suggested they go out for lunch. It was gone two before they returned to yet another session of discussions. Mark was surprised by the number of suggestions Tim made and how useful they were.
"You know, Tim," Mark said, as they were starting to wind things up, "for an academic you have a remarkably good business brain."
"Not really," Tim replied, "I just look at things and apply the analytical techniques we use to understand problems in English, then see what comes out."
"Well, Tim," George commented, "I agree with your grandfather. I don't care how you are doing it but the insights you have come up with have been very useful. As your grandfather has not asked you, though I would not be surprised if he was thinking of it, I'll ask. Will you join the board?"
"I can't. I've got my studies."
"Look," said Mark, "I would not expect you to give up your studies, but your insight could be very useful. Become a non-executive director. That should not get in the way of your PhD work and you will provide a useful view on things for Paul."
Tim agreed, more to keep his grandfather happy, but also because in some ways the idea of being involved with Bettridge's appealed to him. His father had always slated the old firm saying that Granddad would make a lot more if he sold off the assets and invested in property. Maybe, Tim thought, he could help prove Daddy wrong.
Over the next thirty minutes the four men round the table finalised a letter of intent for the merger of the two companies. Bettridge's was the larger business, almost twice the size of Mattashion's but in a much worse state. It was, therefore, agreed that the businesses would be regarded as equal in value resulting in a fifty fifty merger. Until such merger could be completed, George Mattashion agreed to release Paul from his duties at Mattashion's for up to four weeks so he could start to sort out Bettridge's. After that it was agreed that Paul would split his time between the two companies until the merger was completed and a new management structure put in place.
Tim called his supervisor during the break whilst the letter of intent was being typed up for signing and apologised for missing his tutorial that afternoon. He also advised his supervisor that he would not be in on Monday and might be out for a lot of the next week. When asked if there was a problem, Tim replied that a family issue had come up that was going to take some sorting out.
So, it was that Tim was in the group of people who gathered in the car park of Bettridge's Engineering and Electrical at seven-fifteen on the Monday morning. Mark led the way to the oak double doors of the office block and unlocked them using a key he still had. Once the party was inside they moved past the reception desk to the glass doors at the end of the hallway. Mark typed his access code into the keypad by the door, the red light on the panel flashed showing the code had not been accepted.
" Mr Waters had all the codes changed years ago and since then has changed them every three months. Said too many people knew them, " Barry informed Mark. Mark smiled and entered another code, the light flashed green and there was a click as the door unlocked. Mark pushed it open and led the party through to another hallway before turning left into the stair well, and then steered the group up to the first floor. At the front of the office block, overlooking the gardened area between the two car parks, was the board room. Mark shepherded his party towards it. Once again a keypad entry was required to gain admission, and Mark tapped in the code. The green light flashed and there was a click as the door unlocked. Pushing the door open he entered, indicating to the others that they should take a seat at the table. Mark took the one at the top of the table under the full sized portrait of his father-in-law, Graham Bettridge. From the wall at the far end of the table his own portrait looked back at him.
Barry looked at Mark. "Mr Wainwright, how did you know the codes for the keypads? Mr Walters started changing them shortly after you left, and I know he has them changed every three months."
" Yes, Barry, I suppose he has, but unfortunately for him he can only change the user codes in the database, and there is also a set of hard-coded overrides which are burned into the ROM. I burned them in myself. " Barry nodded.
Through the open doors of the board room Mark could hear the whine of the lift in operation, and then the sound of the doors opening. There was the sound of footsteps down the corridor and of door handles being tested, and then a large black man in the uniform of a security guard appeared in the door of the board room.
"Who the hell are you lot? And who are you?" he asked, looking at Mark who was seated in the chair he knew was reserved for Mr Walters.
"I'm him," Mark replied, pointing to the portrait of himself on the far wall.
"And who is he?" the guard asked.
"The owner," the others seated around the table responded in unison.
The guard pressed the call button on the radio strapped across his chest. It beeped once. "Stan, it's not a false alarm. I think you better get up here to the board room. There's a bunch of guys here and one of them says he's the owner." The guard looked around the room again. "I don't know who you lot are or what you're doing here but my boss is on his way so just stay where you are."
They heard the sound of the lift operating again, doors opening and closing, then the lift again. Shortly after, a tall, ramrod-straight figure appeared in the doorway next to the black man.
"Sergeant, so you're still with us." Mark stated.
"Mr Wainwright, sir. Yes, but not for long," the man stated. "It's all right, Ty, Mr Wainwright is the owner. You can go back to your patrol."
"Thank you, sir."
"If you don't mind, I think it would be best if Ty stayed. It will save instructions having to be repeated."
"As you please, sir. Stay where you are, Ty."
"Right, Sergeant," Mark stated, "When Mr Waters, Mr Clements, and Mr Dunlain arrive in the next three quarters of an hour or so, I would like you and Ty to meet them, probably with a couple more of your boys, and bring them directly to the board room. On no account are they to go anywhere else. Is that understood?"
"Of course, sir, though I doubt if any of them will be in before ten-thirty or eleven; they never are," Sargent replied.
"Oh, they will be today," Mark informed him. "They will definitely be here by nine." Mark looked at his watch which read seven-thirty, knowing that at this moment three door bells were ringing and three notices were being handed over. He wondered which of the three board members would arrive first.
It was quarter to nine when the three men arrived. Dale Waters had spoken to them, and they had all agreed to arrive en bloc. " You can ' t do this, " Dale stated as he stepped into the board room waving the piece of paper that had been served on him just over an hour before.
"Oh, I assure you that I can. As of seven this morning I appointed six new members to the board. You know Paul of course and Marsha, and you should know Jeff, Barry, and Bert, or at least you would if you had ever bothered to spend time down on the shop floor. You will not know my grandson, Tim, but I can assure you he will be taking a keen family interest in the company."
"I suppose you expect us to resign?" Dale stated, "I can assure you we won't. You'll have to fire us and that will cost you a fortune."
"No," responded Mark, "I have no objections to you staying in office, but you will not have executive roles from now on. Oh, almost forgot, this is a copy of a notice I sent to the company's bank on Friday advising them that I am giving twenty-eight days' notice of the termination of my guarantee for the overdraft. I would remind you that as you are secondary guarantors of the overdraft as executive directors, the guarantee will now fall on you. Remember you can't revoke your guarantees that were signed as executive directors unless you cease to be a member of the board."
There was a somewhat feeble ongoing argument but by ten of the clock Mark had accepted the signed resignations of all three board members. He then allowed them, under the supervision of Marsha and the sergeant, to remove their personal effects from their offices.
Mark was quite satisfied with the way things had worked out. Once the three directors had resigned, he made a transfer in the form of a loan to the business that was sufficient to clear the overdraft and provide enough working capital to keep the business solvent till the merger was completed.
It was on the way back to Craigh House that Tim asked the question which had been on his mind since the events in the boardroom that morning. "Dad, how could you be so sure that they would resign?"
"Oh, they had no choice. A guarantor can revoke their guarantee at any time, subject to the notice terms of the contract. However, an executive director's guarantee can only be revoked once the guarantor has ceased to be a director. If they had not resigned I would have put the company into administration after 28 days when my guarantee had expired. I could then have bought it back off the administrator and left them paying off the overdraft and loans."
Authors deserve your feedback. It's the only payment they get. If you go to the top of the page you will find the author's name. Click that and you can email the author easily.* Please take a few moments, if you liked the story, to say so.
[For those who use webmail, or whose regular email client opens when they want to use webmail instead: Please right click the author's name. A menu will open in which you can copy the email address (it goes directly to your clipboard without having the courtesy of mentioning that to you) to paste into your webmail system (Hotmail, Gmail, Yahoo etc). Each browser is subtly different, each Webmail system is different, or we'd give fuller instructions here. We trust you to know how to use your own system. Note: If the email address pastes or arrives with %40 in the middle, replace that weird set of characters with an @ sign.]
* Some browsers may require a right click instead
