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Client gifting shares to girlfriend

What to do when we suspect she is trying to take the shares rather than him giving them.

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A client is a 100% owner of a limited company. He had an affair, divorced his wife and is now living with his new partner (the affairee), whom he has made a director of the company.

Since making her a director, pretty much all contact between us and the client company is with her. He has now decided to gift 50% of the company to her. I and the two directors had a meeting to discuss the best way to do this (transfer or issue new shares). He was at the meeting but she did all the talking and she has been the one following up and chasing to get it done. Even the emails supposedly from his email address, I know she has written because of common spelling mistakes and grammatical errors that she makes across the board on emails, blogs, newsletters etc. He is a school teacher and generally when he writes it is done properly.

Normally when clients want share transactions done they are driven by the person giving the shares not the one receiving them.

It is difficult to meet with him on his own and so I was wondering what we can do to protect ourselves apart from just declining to do the work. I have recommended he gets legal advice before proceeding. I have also told him, if we were to go ahead and do this, he would have to sign paper copies of all engagement letters and meeting minutes and send them to me as I know what his signature looks like (as opposed to signing online contracts).

The difficulty is that the chattering classes all acknowledge that she is only with him for the business.

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By Justin Bryant
22nd Sep 2021 11:04

Assuming the gift is significant (>£20k say) I would palm this off on a solicitor to deal with as they have a specific legal duty to check gifts are bona fide (not under duress etc.) and he can get sued rather than you if he messes that up.
https://www.lawsociety.org.uk/topics/private-client/making-gifts-of-asse...

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By Paul Crowley
22nd Sep 2021 11:40

Agree
I would be with OP on this if there was value involved

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paddle steamer
By DJKL
22nd Sep 2021 11:51

You could always do a gold digger risk assessment.

Q1. Is he ugly as sin with poor personal hygiene whereas she could be a super model?

..........

Alternatively, if he appears in control and able to make rational decisions ,you might consider he knows what he is doing with his own property.

First question, are the actual shares worth anything (and if they are you will have already considered how you intend to deal with their transfer for tax purposes),is much in the way of assets retained within this company or does everything get distributed annually?

Second question, does the company depend on what he does, can it operate without his input, such that only real issue if they break up is what he calls the replacement company he then forms?

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By exceljockey
22nd Sep 2021 12:24

DJKL wrote:

You could always do a gold digger risk assessment.

Q1. Is he ugly as sin with poor personal hygiene whereas she could be a super model?

The odd thing is that it is the other way round.

Unfortunately, I suspect that her family run the local chapter of the Legitimate Businessmen of Scilly Association.

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By ireallyshouldknowthisbut
22nd Sep 2021 12:58

@excel if you suspect such things then whilst you can try your best to be helpful, ultimately you need to look after your own kneecaps.

Be scrupulous in your notes, cover your own backside and try not to say "told you so" when his business is takeover.

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By I'msorryIhaven'taclue
22nd Sep 2021 13:37

exceljockey wrote:

Unfortunately, I suspect that her family run the local chapter of the Legitimate Businessmen of Scilly Association.

What'll they do... pelt you with fish?

You mean Sicily, don't you!

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By David Ex
22nd Sep 2021 11:54

Sounds like a potential ethics/conflict of interest matter. Pointing client to legal advice sounds eminently sensible but might be worth also talking it through with your professional body.

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By Tax Dragon
22nd Sep 2021 11:56

Why 50%? 49% tops, surely?

(is a question I might put to him. Or them.
But most of all I agree with Justin.)

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Replying to Tax Dragon:
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By exceljockey
22nd Sep 2021 12:15

Tax Dragon wrote:

Why 50%? 49% tops, surely?

(is a question I might put to him. Or them.
But most of all I agree with Justin.)

She wants 50%. I have told him he needs legal advice regarding a shareholders agreement because at 50% he wouldn't control the company. He just looked at me blankly.

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By David Ex
22nd Sep 2021 13:26

exceljockey wrote:

She wants 50%. I have told him he needs legal advice regarding a shareholders agreement because at 50% he wouldn't control the company. He just looked at me blankly.

Assume he’s not a teacher of maths then if he can’t see that 51>49 but 50=50!!

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RLI
By lionofludesch
23rd Sep 2021 07:12

Quote:

She wants 50%. I have told him he needs legal advice regarding a shareholders agreement because at 50% he wouldn't control the company.

By the sound of it, he already doesn't.

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By Leywood
22nd Sep 2021 12:37

Is he also your client in a personal capacity (self assessments)? Insist on an meeting with him alone. Phone him, do not email him asking for a meeting. See what reaction you get to questions when he is on his own.

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By adam.arca
22nd Sep 2021 12:53

We've had this a couple of times and, honestly, you won't be thanked for "interfering." None so blind and all that.

Definitely raise the issue so that you're covered but just as part of your letter / meeting / however you handle this and you'd presumably always advise legal advice in cases like this anyway?

Justin makes an excellent point (and not one of which I was previously aware).

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By Southwestbeancounter
22nd Sep 2021 13:59

Tricky situation but Justin has given you an ideal 'opt out clause' so to speak.

We had a situation whereby a new girlfriend was even writing letters to us 'signed' by our client with specific instructions regarding his accounts. It was so obvious simply from the tone of the letter, let alone anything else, so I confronted him about it and he had no idea what she'd written so I made sure I called her out on her emails too - that soon got the situation nipped in the bud!

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