New share allocation (SH01) - is this not diluting holdings?

[Spoiler]

Is the sister bringing income or is she 2 days a week on admin duties running the company?

Bit of both - along with admin stuff, she is taking calls, selling products to customers. Taking website orders and ensuring they are scheduled for delivery.
Brother is primarily out delivering services.

[northernladuk]

About workloads:
Brother: works full-time in the business
Sister: Part-time (2 days/week)

The current distribution of ‘wages’ is fine, there’s no issues with the current split. And also no concern if the brother wants his paid as salary, or dividends, or both.

The question i was interested in is with the new issue of the B share, and if this meant a dilution of ownership from 50% to 33% for the sister - as she will have 1 ordinary share, and the brother will have 1 ordinary & 1 B share (i think!).

Is the sister bringing income or is she 2 days a week on admin duties running the company?

[Spoiler]

The no voting rights share essentially means the brother can't veto the sister in decision making, so she still has 50% "power" for want of a better word.

When dividends are issued the award to the original shareholding would be £0 and the award to the B class would be whatever they choose to pay the brother (probably £35-38k I suspect).

If they subsequently decided the sister should get a dividend, they can pay her and the brother the same via the original shares issues and top up the brother via the B share.

Thanks. I get the dividend payment thing, and using the B share to give dividends to the brother only is fine. There’s no issues with that (due to the different contribution levels of work).

About the split in ‘power’ - thanks, i can see how the sister still has 50% voting rights.

I guess the question i still am unsure of is … say they both agree to sell the company. Would the distribution of funds align with the shareholding (as the brother has 2 shares, vs the sister’s 1), or is the number of shares really unrelated to the distribution, and this is more down to the 50% power of voting rights, and they can just agree to distribute funds 50/50, by whatever method is appropriate?

Thanks!

[Spoiler]

For me what is missing is what they are actually doing for their money. Looking at that it's just made up with no mention of the reality of the company. I guess the accounts know this the advice is based on that but as it's written it looks a right crock with no facts.

I don't have the facts so looking purely at that I'd say both accountants are wrong and if you laid the situation bare the advice would be different.

The advice on here has always been to avoid alphabet shares except in very specific arrangements. They aren't to be used just to throw money around to people that shouldn't be getting it if you looked at the reality and that's just what it looks like to me. B shares, sister, wages etc.... Without the facts I can't add anything to that.

But I don't have much of a clue and IANAA.

About workloads:
Brother: works full-time in the business
Sister: Part-time (2 days/week)

The current distribution of ‘wages’ is fine, there’s no issues with the current split. And also no concern if the brother wants his paid as salary, or dividends, or both.

The question i was interested in is with the new issue of the B share, and if this meant a dilution of ownership from 50% to 33% for the sister - as she will have 1 ordinary share, and the brother will have 1 ordinary & 1 B share (i think!).

[northernladuk]

For me what is missing is what they are actually doing for their money. Looking at that it's just made up with no mention of the reality of the company. I guess the accounts know this the advice is based on that but as it's written it looks a right crock with no facts.

I don't have the facts so looking purely at that I'd say both accountants are wrong and if you laid the situation bare the advice would be different.

The advice on here has always been to avoid alphabet shares except in very specific arrangements. They aren't to be used just to throw money around to people that shouldn't be getting it if you looked at the reality and that's just what it looks like to me. B shares, sister, wages etc.... Without the facts I can't add anything to that.

But I don't have much of a clue and IANAA.

[ladymuck]

The no voting rights share essentially means the brother can't veto the sister in decision making, so she still has 50% "power" for want of a better word.

When dividends are issued the award to the original shareholding would be £0 and the award to the B class would be whatever they choose to pay the brother (probably £35-38k I suspect).

If they subsequently decided the sister should get a dividend, they can pay her and the brother the same via the original shares issues and top up the brother via the B share.

[Spoiler]

Asking for a friend (honest, i am not involved!). Their accountant just sent over a SH01 form, with the allocation of a new Ordinary B share. To me, it looks like this is diluting holdings but as IANAA I am probably wrong, and the accountant is right (let’s hope so!).

Some background:
Ltd company established ~20 years ago
2 shareholders (brother/sister), each with 1 Ordinary share each
Both siblings work for the company paid via PAYE, Sister has got paid minimum salary (~£12500p/a); brother takes home ~£50k.

New accountant has come in, and suggested brother switches to dividends, to save the company ££.
Accountant has sent over the SH01 form, which adds in 1 new Ordinary B share.

So, SH01 statement of capital now shows:

Ordinary shares x2 (value £2): full voting rights, full dividend rights
Ordinary B shares x1 (value £1): No voting rights, full dividend rights (issued to the brother)

To me, the sister’s original 1 ordinary share which currently is 50% holding is now going down to 33% holding. But i guess I am wrong about this because …

When the accountant was asked about it, their reply was:

The understanding was that the ownership of the Company would remain 50:50 between sister and brother
The non-voting share issued to the Brother was to facilitate the payment of Dividends to him and thereby reduce his salary and the associated national insurance cost to the Company.