Splitting share classes
Traps and pitfalls, as well as methods (where available) of overcoming them, are requested in respect of the following typical scenario:
A close trading limited company is set up and, at a small cost in amending the Articles of Association, each participator holds a separate class of shares. The purpose of separating the classes is so that dividends can be voted on each class without reference to their proportionate holdings and without recourse to dividend waivers under deed
Included in the list of shareholders are various grandchildren. Their classes of shares have no voting rights nor rights to assets in winding up. In reality, there are no rights attached to their shares, they have no value, and the benefits of share ownership are entirely at the discretion of those with the power to vote dividends to them.
It is obvious that the only purpose that the shares were created is to divert income into their hands, ie to assist with school fees or simply to avoid higher rate income tax on the true wealth generators in the business.
So: Anything wrong? It doesn't look as though it would work for minor children (as opposed to grandchildren), and I can also see problems with a gift of shares to a spouse. Both might fall foul of settlement provisions, although if anyone knows of a route to include them I would be interested.