We are two founders of a small Pvt Ltd startup company and we are registered as Directors. Our company is into travel technology.
We are holding different positions were me as the CEO and other person as COO. I was handling duties of CEO and CTO whereas COO was handling accounts and sales.
Three months ago COO has recruited some senior sales employees and promised for a certain sales target. They were offered work from home too. But after three months also he was not able to achieve sales target, moreover it made a loss to the company .
At the end of 3rd month, once we were having discussion on the same COO became hyper and mailed a resignation letter of COO position.
His point was "he admire efforts" but for me it was results which in 3 months they couldn't achieve.
So in mail he has written he will be working for next 5 days only. He started sending all accounts, debts and other work email to me and asked me to take care of it.
As of him, I have to take care of all the works plus the financial burdens including the salaries of new recruitment. So my question is
Is a COO (also a director) can quit the company on his role on COO all of a sudden but willing to continue as a director?
Should I fire the new recruitment because of their out performance?
Do CEO has right to ask or suggest duties of COO?
If COO is quitting, wont be there any notice period?
What precautions has to be taken for such scenarios? (Important)
This is more than a quick answer. If you would like to discuss, message me directly and I can help with some of these issues.
We do not know your location, but assume you are not US-based because of the use of "Pvt LTD" so this may not apply to you as it would in the USA. Most states in the USA are "at-will" meaning that the employee or employer can terminate the relationship with cause or for no cause.
In the US, the COO can quit when they want if there is no specific agreement documenting that they are not "at-will" and may be required to provide sufficient notice as outlined in the document.
If you have an employment agreement that links the COO role to being a Director, then resignation would generally mean the person has also resigned as a Director. This document in the US will define many general duties and usually include language that the CEO can assign other duties by mutual consent.
If the Director role is covered separately in a shareholder's agreement or operating documents, you need to determine if the Director role is terminable by you. If the Director relationship is linked to shares represented, and the owners of those shares are granted the right to appoint a Director of their choosing, you may not be able to terminate the Director role.
Due to the cost incurred to hire the recruits, you may want to take a little time to evaluate why they are not successful. It may be bad selection, poor management and process, or a product/market fit issue.
The best precaution to reduce the risk of such issues (they can never be totally prevented) is to have experienced legal/HR professionals involved. It may seem to be a cost that you do not want to incur early, but these are the problems in all start ups that can be reduced by thinking ahead. Get a startup lawyer to advise you. Many will do it for reduced fees at the beginning to build a relationship with you long term.