Best way for a shareholder to come in a closed Ltd company.

Best way for a shareholder to come in a closed...

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A small owner managed limited company is going to appoint a second director and the plan is to have both directors equal 50% shareholders.

Both individuals will win and complete engineering type contracts. Both will look to take a mixture of low salary and dividends as a method of extracting funds. Interim dividends will be taken quarterly based on management accounts produced as part of the VAT return process. In reality both director will draw around £2.5k a month from the business. The business will easily have enough retained profits to cover the monthly payments.

There is no real assets in the company as such as its mostly labour only services, with all monies previously taken as described above.

Question is.................... what is the most effective way of doing the share transfer or allocation to the incoming director/shareholder.

Should the current director/shareholder transfer 50 of his 100 shares at nominal value

Should the current director/shareholder sell 50 of his shares to the incoming shareholder. How do we value the shares and does this need to be run past the shares valuation department of HMRC as we do with goodwill valuations

Should the company do a new share allocation for another 100 shares with the creation of a share premium reserve

the incoming director/shareholder is going to invest £10k into the business to purchase a van and some new tools. To avoid GCT on current director (even tho its under the exemption) and to avoid a share premium reserve we are thinking to sell 50 of the current directors shares at par value, fill in form J30 and the incoming director loans the company the £10k which he can drawn on as part of the profit extraction route.

It should be noted the incoming director is bringing similar contracts into the company as the current director already has. The current director is not interested in any consideration but wants the incoming directors skill base more than anything else.

Im i missing anything here or does anyone have some relevant pointers

Much appreciated in advance.

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By Novakova
13th Nov 2013 23:10

Best way for a shareholder to come in a Ltd company
The simplest way is for shareholder A to sell half his shares to B. If they are connected, CGT computation will have to be based on market value of the shares transferred.
You are quite right in that a loan by the new director to the company should be credited to his loan account.

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