Shares - Partly Paid. Looking for guidance.

Shares - Partly Paid. Looking for guidance.

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Medium sized private company wishes to issue shares to employee. (taking his shareholding from 20 to 30%)

The market value of these shares is £500k. 

The employee has agreed to pay full value for these shares.  However they will be only be partly paid for the time being.

Employee will write a cheque for £100k and the company will not call on the £400k just yet. 

The idea is that the dividends received on the additional 10% will help pay the company for the uncalled element.

Are there any company law rules which govern this?

What are the accounting entries in the company's accounts to show the unpaid element? 

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By cathygrimmer
05th Apr 2011 10:14

Tax!

Don't know anything about the company law side (except that I believe you can't vote re partly paid shares - but I may be wrong!) and can't advise re accounting entries (not being an accountant!) - but don't forget there will be a notional loan in respect of the unpaid element.

Cathy

[email protected]

 

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By cathygrimmer
05th Apr 2011 10:42

PS!

Sorry, meant to add that if the company is close and either the employee is involved in the actual management of the company, or the employee together with associates own at least 5% of the share capital, there will be no tax charge but I got distracted by a phone call half way through typing my answer and forgot to add it!!

Cathy

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By blok
05th Apr 2011 10:43

.

Hi Cathy,  I realised the loan element (BIK), however relief would be available under s392 ITA 07 to counter the BIK element.

My opinion is that s455 will also not be payable either, until the call is made.

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