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Paperwork needed to increase share capital?

Company with two shareholders having 1 share each wants to increase share capital to 200 (100 shares each) to enable them to take different dividends payments.  How would they go about this.  What paperwork is necessary and can it be done online with Companies House or not?  Would the Memorandum and Articles need altering or is it just a form filling excercise?

Thanks in advance for any help/advice posted.

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It depends

Just read the existing Memorandum & Articles.

Was this company formed before the relevant provisions of CA 2006 came into force?  If so, it will have an authorised (maximum) share capital set out in the Memorandum, which is now deemed to be incorporated into the Articles.  If that is less than £200, you will need to amend the Articles by special resolution and send an copy of the amended Articles to Companies House for filing.

If the company was formed after the CA 2006 came into force, the concept of a maximum authorised share capital no longer exists and the directors are probably empowered simply to issue more shares at their discretion, as they would be for a pre-CA 2006 company with an authorised capital of at least £200.

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Thanks Euan

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Can't be done online.

You need to pass the resolutions correctly (declaring an interest if necessary) and file amended Articles. As Euan points out, you must read your Articles first, as in a pre CA 2006 company you may not have the authority to change shares, and there may be conflicting pre-emption rights which will need waiving. You also need to file a form with Companies House as well as the written resolutions. If you do not do this right, the changes will be ineffective.

For tax, you may be vunerable to tax under s447 ITEPA 2003, alternatively, NICs may be applied when dividends are part of a remuneration scheme. That is all very much depends on the full facts of who is being paid what and why, what advice you are giving about this and whether HMRC will ever a) catch you out or b) take any interest in these aspects of your clients' affairs.

Virtual tax support for accountants and their clients: www.rossmartin.co.uk

 

 

 

 

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Should be easy

We're only talking about £200 - I can't see that there would be any issues with remuneration schemes or whatever. And as far as the articles go, it's a long time since I looked at the standard Table A for pre- CA 2006 companies, but I'm pretty sure they allow shares to be allotted at the directors discretion up to the authorised limit. They may require existing members to be given the chance to subscribe for them first, but this is a husband and wife company, so it's all going to be by mutual agreement. I can't see that there is an issue in this case.

All you really need to do apart from a written resolution (which you don't even need to file externally) is send Form SH01 to Companies House. It's a bit more complicated than the old Form 88(2), but in Section 7 (Statement of Capital) just put "standard" in the particulars of rights, assuming there are no unusual restrictions such as non-voting rights. No one is going to ask for more details.

Of course, you will both owe the company for the shares (the consideration figure on SH01) and this should be debited to your loan accounts. It will soon be cleared by salary, dividends or expenses.

If you want to avoid putting a couple of hundred pounds into the company, you could always sub-divide the existing shares instead into 200 shares of a penny each. You can do this on Form SH02 (section 4). I don't think you even need to attach a copy of the resolution any more like you did with the old form. The only slight problem here is that the Companies House website doesn't seem to recognise penny shares when you file the Annual Return.

You might need to send Form 40 to HMRC though. I know they removed some of the sillier reasons you needed to file this form a few years ago such as new incorporations, but you may still need to do it for fresh allotments. Otherwise, they will have an excuse to charge you a penalty. Perhaps someone else out there can advise on this point.

Chris

 

 

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'Different dividends payments'

The OP mentions the reason for the increase in share capital to be to allow 'different dividends payments.'

 

Presumably the intention is to have two classes of shares, etc. in which case, regardless of whether you are CA85 or CA06 you'll need to amend Articles, etc. to achieve the aim.

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Beware s660

Actually, I see the OP merely referred to 2 shareholders, not husband and wife (although they probably are). In that case, there could still be issues under the s660 settlements legislation, despite the Arctic Systems ruling, if you subscribe for new shares. If the intention is to vary dividend payments (presumably to optimise the basic rate bands) I think it is far better to sub-divide the existing 2 shares on SH02 and then gift some of the shares to the other person. That will enable you to take advantage of the gift exemption in s660. Of course, this only works for spouses and civil partners. For anyone else there could be capital gains tax issues.

Chris

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