A & B shares
Apologies if these seem daft questions, but I think dinosaurs were roaming the earth last time I had anything to do with different classes of shares.
I have a couple of Ltd. Co. clients with husband & wife as sole directors and equal shareholders but where one of them now has substantial other income. When dividends are paid this either gives rise to higher rate tax on one director, or the dividends have to be limited to the higher rate threshold, resulting of course in wasted basic rate allowance for the other director.
It seems to be fairly evident that one director cannot waive his or her dividend where they are husband and wife, so I was considering the option of having A and B shares where different rates of dividend can be paid on each; this would also reflect the effort put in by each director. There’s been quite a bit on the forum about this and I can see that the process is not entirely guaranteed to be watertight although it does seem to be thus far, but questions are:
- Can husband simply give all his ordinary shares to his wife, and these become A shares ? Presumably there would be no CGT implications between spouses.
- Are there then any problems with issuing B shares to the husband ? If, say, 100 new B shares were issued can they simply be at £1 each off the directors’ loan a/c as the original shares were, or does the actual value need to be taken into account somehow, as several years down the line the original shares are now worth considerably more than par. I imagine the directors would wish to remain basically equal shareholders in the businesses.
- As to issuing the B shares, is it simply a matter of sending in the relevant form to Co. House and, if necessary, amending the Memo & Articles ?