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Alphabet shares

My client is MD of a family company. Several family members work in the company and are on market salaries. The shares are widely distributed amongst the family at present with one share class.

The MD keeps pressing me to reorganise matters to bring in alphabet shares, reduce salaries to say £624 per month and pay out varying amounts to the different share classes to top up the nominal salaries. I keep advising against but I can’t quite convey to him the stumbling blocks. The company has a significant break up value.

In what circumstances would you go ahead with a reorg such as this? Or would you never do it?

Thank you.


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29th Nov 2012 11:39

Legislation and guidance is clear

The legislation has existed for several years to knock this on the head. HMRC guidance is clear that it is caught. The only thing missing appears to be the will from HMRC to challenge these consistently. I am not convinced that lack of resources is the sole reason but am at a loss to come up with any other reason. If your MD does go ahead, he needs to be told (in writing) of the risk that he is storing up a potential large liability for the future.

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