Shared ownership: Director vs Company Secretary & divorce/separation

[malvolio]

Actually, a partner is not a connected person under the S660a regulations and clearly doesn't come under the definition of a spouse. All that has to happen is that she buys a share of the company at a reasonable valuation, then collects dividends just like any other unattached shareholder.

[TheFaQQer]

Agreed but must also be demostrated this is being done. You can't just give your partner/wife the money for nothing which I would bet many set ups are doing.

True.

My wife does a fair bit of work for the company, so I'm not too concerned. She also has to sign off the expenses that are claimed, as part of the dispensation we have. It's her signature that is on all the company paperwork (unless it has to be mine as MD), so she signs all the contracts etc.

[northernladuk]

Being a company secretary has certain legal responsibilities. It's not unreasonable to pay someone £5k a year to deal with those responsibilities.

Agreed but must also be demostrated this is being done. You can't just give your partner/wife the money for nothing which I would bet many set ups are doing.

[TheFaQQer]

But think carefully about this as well. She has to earn it. 5k a year is a lot for book keeping when your accountant costs you £1200. Make sure you can justify it to HMRC, not to you.

Being a company secretary has certain legal responsibilities. It's not unreasonable to pay someone £5k a year to deal with those responsibilities.

[northernladuk]

Unless she has no other income in which case you could pay her 5k or whatever the threshold is for bookkeeping, contract searching etc.

Unless anyone knows better.

But think carefully about this as well. She has to earn it. 5k a year is a lot for book keeping when your accountant costs you £1200. Make sure you can justify it to HMRC, not to you.

[Old Greg]

And that is what I have just realised as partner = unmarried in my case. Pitty my accountant didn't point this out. Looks like I'm keeping this a solo venture.

Jase.

Unless she has no other income in which case you could pay her 5k or whatever the threshold is for bookkeeping, contract searching etc.

Unless anyone knows better.

[Jase]

Arctic clearly defined the legislation - a married couple with the same share class etc. is exempt from the settlements legislation. I'd expect that this would also apply to those that are in a civil partnership.

If you aren't using the word "partner" to mean either of those, then you aren't going to get very far.

And that is what I have just realised as partner = unmarried in my case. Pitty my accountant didn't point this out. Looks like I'm keeping this a solo venture.

Jase.

[TheFaQQer]

Having done my research I'm about to set up my partner with a 30% share in my company. I have two questions:

1. My accountant has advised my partner should also be the Company Secretary. Based on my research there is no requirement for my partner to be a Company Secretary or a Director to be a shareholder. But I have no objection and see how it supports a case that they are involved in the company if such a case ever needs to be made. My question: is there any tangible difference between my partner being a Company Secretary versus a Director in this scenario?
2. Are there any mitigation strategies to consider putting in place in the unlikely event of divorce/separation? I had considered different share classes, one without voting rights, but then discovered that having equal shares was the main defence in the Arctic case. Also, a 30% shareholder can block any Special Resolution (CA 2006, s 283) so it may be difficult to "manoeuvre" them out.

I'm fully aware some will have the opinion that this having my cake and eating it too. But given the proposed structure is perfectly legal, I think it is sensible to investigate mitigating risk as much as possible. I'm also not concerned enough about the second point to seek professional legal advice, but thought it may be worth asking in case I have missed anything.

Jase.

Arctic clearly defined the legislation - a married couple with the same share class etc. is exempt from the settlements legislation. I'd expect that this would also apply to those that are in a civil partnership.

If you aren't using the word "partner" to mean either of those, then you aren't going to get very far.

You no longer need a Company Secretary for a small business. My wife is a director and company secretary, but is not a shareholder. She gets paid for the work that she does for the company, but is not entitled to dividends.

[Jerry]

Hi,

1. Do you want/need your partner to be either? There is no requirement for a limited company of our size to have two directors or a company secretary anymore. If you are going to make him/her a shareholder to allow benefit from dividends then i suspect making them a director will also be beneficial (in case it goes to court).
2. Both directors and company secretaries are "legal" roles in the sense that they have to fulfill certain obligations (e.g. responsibility for maintaining and submitting records). Your accountant can give you the detail, but you can delegate pretty much everything to him and just get left with signing papers at the end of each year. Maintain a spreadsheet showing income and expenditure, and ensure dividend vouchers are written up.
3. In the case of divorce, and assuming your company, like mine, is a consultancy business, then i wouldn't trouble yourself too much. If, when you separate, there is money in the business, it will be treated as an asset for division regardless of whether or not your spouse is a director or not. In my case, my wife's solicitor asked for 50% of the business on an ongoing basis. I offered her 100% of the business, which her solicitor leapt at, clearly thinking i was stupid. They changed their minds pretty quickly when they realised that the business had an outstanding tax bill and was in any case worthless without me (a consultancy business' only asset is - in most cases - its consultants). If your spouse is a shareholder, she is obviously entitled to a share of the business up to the value of her share anyway. In some ways i suppose it might be beneficial to give her a percentage. If, for example, she holds 30% of the shares, the judge might conclude that 30% was her rightful share. In other circumstances (say if you have a long marriage and kids) she might otherwise get a 50% share. Maybe others can comment on this.

Jerry

[Jase]

Having done my research I'm about to set up my partner with a 30% share in my company. I have two questions:

1. My accountant has advised my partner should also be the Company Secretary. Based on my research there is no requirement for my partner to be a Company Secretary or a Director to be a shareholder. But I have no objection and see how it supports a case that they are involved in the company if such a case ever needs to be made. My question: is there any tangible difference between my partner being a Company Secretary versus a Director in this scenario?
2. Are there any mitigation strategies to consider putting in place in the unlikely event of divorce/separation? I had considered different share classes, one without voting rights, but then discovered that having equal shares was the main defence in the Arctic case. Also, a 30% shareholder can block any Special Resolution (CA 2006, s 283) so it may be difficult to "manoeuvre" them out.

I'm fully aware some will have the opinion that this having my cake and eating it too. But given the proposed structure is perfectly legal, I think it is sensible to investigate mitigating risk as much as possible. I'm also not concerned enough about the second point to seek professional legal advice, but thought it may be worth asking in case I have missed anything.

Jase.