Company Shares - restructuring

[elster]

Hi All,
am a little confused at the moment and could do with some advice.
My company is setup with 2 Ordinary shares, one allotted to each of the Directors.
I am looking to modify this and convert the existing Ordinary shares into Ordinary A and B Classes whilst retaining the same allotment - i.e. one each

Is this all via SH01?
Whats the best way to do this ?

thanks

[northernladuk]

Who has advised you do this? I presume you want a B class share so you can vary the payments to the other director to keep yourself under the threshold which is going to be a nice big red flag to HMRC.

My account advised strongly against this. Dividend waivers were also to be avoided. She also advised against re-structuring the shareholding too many times, particularly to B class shares so I dropped it like a stone.

It would be interesting to hear what our CUK accountant posters have to say on the matter.

Is the other shareholder your wife or family?

[Jessica@WhiteFieldTax]

Have a look at parts 11 and 12 of chapter 7 in here:

Life of a Company - Part 2 Event Driven Requirements - GP3, includes information on Directors and secretaries, Change of Registered Office address, Change of name, Resolutions

Its SH02, plus you need to prepare your own special resolutions (nd almost certainly board minutes).

SH01 is for issuing shares, and although thats easier if you are trying to go into A shares and B shares, it doesn't change the existing shares.

Another route, may be to transfer 1 share from Director 2 to Director 1, then issue 2 x Ordinary A shares via SH01 to Director 2- you end up with irector 1 having 2 x ordinary, director 2 x A ordinary - same effect.

Usual health warnings on income splitting, settlements and hell fire and brimstone apply.

[TheFaQQer]

Who has advised you do this? I presume you want a B class share so you can vary the payments to the other director to keep yourself under the threshold which is going to be a nice big red flag to HMRC.

Not necessarily. It depends on the work of the other shareholders. I know a group of people who setup a consultancy - each has 1 class A share each, then each has their own class as well (1xB, 1xC, 1xD, 1xE).

The whole point was that they all had equal voting rights, but could get different dividends as necessary (and agreed by the others).

If you are looking to split with a spouse / civil partner, then you're right though - same classification is important.

[northernladuk]

Not necessarily. It depends on the work of the other shareholders. I know a group of people who setup a consultancy - each has 1 class A share each, then each has their own class as well (1xB, 1xC, 1xD, 1xE).

The whole point was that they all had equal voting rights, but could get different dividends as necessary (and agreed by the others).

If you are looking to split with a spouse / civil partner, then you're right though - same classification is important.

Again, as always, absolutely technically correct. I had assumed if he had to ask this on a public forum without taking professional advice he wouldn't be running a consultancy. Be interesting to see what the situation is.

[northernladuk]

Usual health warnings on income splitting, settlements and hell fire and brimstone apply.

If it isn't hard enough dealing with HMRC and IR35 we have this to consider as well.. Jeez...

[elster]

Hi,
yes this is for dividend distribution only. I dont see the issue with it - I know several contracting companies that have this structure.
It's more efficient and also more equitable given the roles and responsibilities we have / relative effort etc

just looking to understand the process.

thanks

[elster]

Have a look at parts 11 and 12 of chapter 7 in here:

Life of a Company - Part 2 Event Driven Requirements - GP3, includes information on Directors and secretaries, Change of Registered Office address, Change of name, Resolutions

Its SH02, plus you need to prepare your own special resolutions (nd almost certainly board minutes).

SH01 is for issuing shares, and although thats easier if you are trying to go into A shares and B shares, it doesn't change the existing shares.

Another route, may be to transfer 1 share from Director 2 to Director 1, then issue 2 x Ordinary A shares via SH01 to Director 2- you end up with irector 1 having 2 x ordinary, director 2 x A ordinary - same effect.

Usual health warnings on income splitting, settlements and hell fire and brimstone apply.

thanks for this - this is what I have done - OPTION 2
there seems to be no specific paperwork for share transfer, so I have written it up in a board meeting memo and completed a special resolution and filed it. I guess I'll highlight the changes in my annual return.
there is nothing in my articles which prevents issuance of different classes of share
so it looks like job done

thks

[Jessica@WhiteFieldTax]

thanks for this - this is what I have done - OPTION 2
there seems to be no specific paperwork for share transfer, so I have written it up in a board meeting memo and completed a special resolution and filed it. I guess I'll highlight the changes in my annual return.
there is nothing in my articles which prevents issuance of different classes of share
so it looks like job done

thks

Correct re share transfer. Minute it and update on next AR, there is no in year update facility.

You could google "stock transfer form" and fill one in if you felt so minded, but you only keep it on your files, doesn't need to go anywhere.