Alphabet Shares

Alphabet Shares

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I currently have a client with 3 Directors and 300 shares at £1 each (100 shares each Director).

One Director is retired, and it has been agreed that this director will no longer receive dividends on shares, discussed at their AGM, and that the share type should change for him to an alphabet share.

On looking at the Annual Return there are some choices for Shares and I wonder if anyone can confirm the correct choices.

Ordinary Shares

A Ordinary Shares

B Ordinary Shares

Other

Are Ordinary shares already A shares, or can I just leave the Ordinary Shares as they are (200), and create a new share type ‘A Ordinary Shares’ for the shares with no dividend rights (100).

Or do I need to move them all to A Ordinary shares (200), B Ordinary Shares (100).

I understand that I also need to complete

form SH08 Notice of name or other designation of class of shares and

form SH10 Notice of particulars of variation of rights attached to shares.

Is there any suggested wording that can be added to the Articles of Association to reflect the change?

Thanks in advance

Replies (11)

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RLI
By lionofludesch
16th Jul 2015 14:19

Big Job

I would suggest approaching a legal firm to amend the Articles.

It isn't something you should be taking advice from an internet forum about.

Thanks (1)
Replying to lionofludesch:
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By Carolynne
16th Jul 2015 14:30

Thanks

Thank you for the reply, but is it something that needs to be amended in their?  Or is it no longer necessary?

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By Jamie Thompson
16th Jul 2015 15:08

As long as the articles permit, why doesn't the company issue the retired director 150 ordinary B shares and then he gifts the other 2 directors 50 ordinary shares each?

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By johngroganjga
16th Jul 2015 15:30

The existing ordinary shares are not already A shares, but it may be helpful so to re-name them for clarity when the new class is created.

Yes the articles need to be amended, since if you leave them as they are all shares will ipso facto have the same rights, which is the opposite of what your instructions require you to achieve.

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RLI
By lionofludesch
16th Jul 2015 15:41

One

You may find that the existing articles don't permit more than one class of shares.

We can only guess ........

Thanks (1)
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By King_Maker
16th Jul 2015 16:08

Dividend waiver(s) too messy?

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By User deleted
16th Jul 2015 17:15

Waiver

The Director no longer wishing to receive dividends could purely decide not to waive his entitlement - then no choice, but; a) pay him; b) don't pay anyone

Presumably neither of these are an option

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Replying to puzzel:
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By Carolynne
16th Jul 2015 18:30

The Problem being....

The problem being that the two directors receiving the shares are working full time in the business and the one retired doesn’t want the dividends and isn’t ‘earning them’ in all their eyes either.

 

To waiver wouldn’t work in this instance, as all three agree the other two should receive all the dividend that is available between them, rather than leaving a third in.

 

As per an earlier comment about gifting shares commented by Jamie, the retired Director would have to pay tax on the shares gifted as though he has received cash for them, and a valuation of the business would be required to ascertain what they have been ‘sold’ for, as far as I am aware.  It is a family business.

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Replying to Caroline Beadle:
RLI
By lionofludesch
17th Jul 2015 08:58

No-one

Carolynne wrote:

The problem being that the two directors receiving the shares are working full time in the business and the one retired doesn’t want the dividends and isn’t ‘earning them’ in all their eyes either.

No-one earns dividends.

I'm shocked.

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By GrahamASA
16th Jul 2015 19:56

Oh goodness...

Geesch... this is really easy to sort out. PM me and I'll give you my contact details and I'll tell you what to do, what paperwork you need, what to file, etc. It sounds like you need some background knowledge as well to help you understand the fundamentals of corporate and tax law at play here.

I am qualified in law (an ex-lawyer) and accounting (currently partner in a practice) and do a lot of corporate restructuring.

Thanks (1)
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By kiwilondon99
17th Jul 2015 09:25

B for A ?

yes articles may need changing, consideration as for what though ,  ie B and class rights - then  notice, meeting,  minutes and filings and changes prepared and files as necessary [ minute book, co house etc ]

but surely once  having created a B class Ordinary share,  could the retiring shareholder not simply ' swap' their A for B on a 1-1 basis,   A + B shares have the usual full rights to divs[on class] and voting  and upon windup ?.  That way divs can be decalred as required by the Board............

*   why not buy retiree out -

*   what does the shareholder agreement state - before getting involved witth the changes to articles etc  ie look at this first as to how to progress then consider options if there is not one in place ?

Thanks (1)