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Employee purchasing shares in close company

Scenario- Ltd company, one Director who is also only shareholder. Wants 2 of his employees to commit long term to the company via them purchasing shares in the company. Both employees are willing to fund £30k each for 20% each. Leaving the Director with the majority 60%.
Is there is any obvious pitfalls here? Someone mentioned it's better to give Prefernce shares rather than ordinary shares?
Any help here welcome.
Victoria Chalmers

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By Anonymous
08th May 2009 10:31

Many issues
Victoria
Unfortunately this is not straightforward, as there are valuation, multiple PAYE implications as well as possible CGT and IHT outcomes, company tax and tax anti-avoidance legislation too. That is before you get started on the legal side of things.

I would be delighted to assist and fill you in but there is so much involved that I can only do this on a paid basis. You can contact me: [email protected]

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08th May 2009 10:26

Employee shares
Surely if they all have equal rights & the company pays a dividend, each individual pays income tax on their dividend. Is it different because they are employees & shareholders???
In answer to your other question, the company will need to issue new shares.

Thanks for your help here.

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08th May 2009 08:17

TAX...

good idea - but what about the tax impact and who picks it up for new s/h


shareholders agreement a definate must for the current owner - legal advice needed on this

is current shareholder selling some of his shares or company issuing new shares to effectively dilute owner..... CGT on owner

be careful and seek advise MR OWNER

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By pawncob
07th May 2009 21:17

What's their preference?
Why would they want pref shares, which usually have different rights?
If the shareholders want to rank equally with the existing shareholder they must have shares which rank pari passu with his.

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