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Share in business for web developer

I have a small limited company client who wants to give a freelance web developer a 10% share in the business to retain his services.  The business is only in its 3rd year but things are really starting to pick up by all accounts.  They want to retain the services of the web developer in exchange for a 10% share .

Current shareholding is director A has 90% and director B has 10%,  The idea is to gift 10% to the web developer from director A reducing his shareholding down to 80%.

I havent been involved anything like this before which involves an non employee so an advice much appreciated.  Ive got the FRSSE 2008 here to have a look through.


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12th Jan 2013 01:10

Someone can correct me if I'm wrong...

But the transaction A > Freelance 10% seems to be happening entirely outside the company and I would say it would not be covered under the treatment for share based payments.

I would say there is;

1) a potential capital gain on the sale of 10% of the company from director A to Freelance of VALUE OF SERVICES less COST OF SHARES, the actual value of the shares is possibly the best point of reference for the value of the services, but any figure is likely to be at best an estimate.

(A couple of points on this, 10% is possibly not worth much as virtually any decision can be made with a 75% majority, generally including the issue of new shares or classes of share, articles permitting.  Similarly the drop from 90% to 80% will have little effect on director A in my opinion)

2) web services as a cost to the company and the other side of the journal going to director As loan account.



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