Share issue at discount
A limited company has 1,000 authorised shares at nominal value £5,000 per share. The business has allotted two shares at this stage, 1 share to each of the two directors, the two shares are fully paid up for £10,000. A new investor wishes to buy a third of the authorised equity (333 shares) for £333,000 at a discount of £4,000 per share under the par value.
If I remember correctly it is not permissible for companies to issue shares at a discount (not sure why this would be, they are after all allowed to issue at a premium?). The business is keen to get the investment it needs but the investor wants 33% of the business for his money. The business has a net worth of just £10,000 at this stage, so the investor is paying £333,000 for just 33% of £10,000 (as the potential for the business is very good). Although the shares would be issued at a discount they are in fact way over the balance sheet valuation of the percentage ownership being given away.
What's the best way forward to expedite this deal?
- Is Xero payroll as rubbish as I suspect it is? 1,734 39
- Accounting for corporation tax 269 8
- Sole trader registering for the first time 339 1
- Digital tax accounts - what do we expect? 1,008 18
- Creative Auto Enrolment 583 8
- Tax Fines - HMRC 880 15
- Can an owner hold company money 334 6
- Account and Taxable Profit 331 17
- Class 2 NIC 303 5
- Probate services 430 9
- Is self-employment "another job" for PAYE 401 7
- Vat payable on van 191 1
- Bookkeeping Rate of Pay 2,842 42
- Invoices raised after company dissolution 247 7
- Community Faux Pas 936 26
- Cash gift from India 163 1
- Is cloud accounting actually pretty pants? 2,320 40
- Windows10 217 4
- Taxi Drivers Cost of Sale 630 24
- Digita Accounts Production Advanced - general perception 483 25