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Issuing B shares

Two directors hold equity shares in unequal proportions.

They would like to take equal salary and equal dividends up to an agreed level then if surplus profits exist distribute a balance in accordance with their equity shares.

The suggestion is to issue B shares out of profits which will give them a right to share dividends equally.

Mems and Arts and resolutions can be taken care of but are there any tax pitfalls in this proposal?

Anyone with previous experience please?

JP

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Well! You could ...

... either:

re-categorise Director 1's shares as A shares and Director 2's shares as B shares, having resolved to amend the Articles to establish the A & B shares ranking pari passu in all respects except dividends, and then declare different dividends to the two classes so that the total amount of each director's dividend is the same up to the chosen level.  After that, you would declare identical dividends.  Oryou could issue B shares on a 50/50 basis to the two directors, having resolved to amend the Articles to establish A & B shares with the B shares having no rights other than the right to receive a dividend, and then declare dividends on the B shares up to the chosen level and above that, on the A shares.

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Not sure about your second approach...

Euan MacLennan wrote:
you could issue B shares on a 50/50 basis to the two directors, having resolved to amend the Articles to establish A & B shares with the B shares having no rights other than the right to receive a dividend, and then declare dividends on the B shares up to the chosen level and above that, on the A shares.

Doesn't this essentially mean that these become preference shares as they are no longer pari passu or at the very least open dividend distributions up to challenge by HMRC (albeit they won't get very far)

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i have just asked an identical question for identical situation

freaky!!

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is it easy to amend the articles?

how do you actually go about doing this?

in my situation, i will be going for the first option.

Aplogies for hi-jacking your question jimpeters!

thanks

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