new investor structure

new investor structure

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I have a start up client who has been offered investment. Will be 200 shares to the investor plus a shareholder loan.I just wanted a second opinion on best approach.

My client owns 1000 shares and could sell 200 to the investor

This would of course give the investor same rights attached to these shares.

There is to be a shareholder agreement whereby the investor will not take any dividends until profits reach a certain level. Can this agreement override the rights or would I perhaps be better of issuing a new class to the investor?

If they both own same class as shares but whilst profits below agreed limit, the investor does not receive a dividend when one is taken by my client, does a shareholder agreement confirming when the investor will be allowed to take a dividend, avoid problems with HMRC re dividend waivers?

Many thanks

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Nichola Ross Martin
By Nichola Ross Martin
28th Apr 2015 18:02

Yes and No

You set up the agreed allocation in the shareholders agreement, and so you won't need waivers. There are some potential tax issues depending on the investor's activity within the business. However if his shares are not employment related then that saves a lot of heartache, normally you will set up a different class of shares. This is all best handled by decent commercial lawyers because the devil is in the drafting and there are an enormous number of different factors to consider, not least an exit plan! 

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