I have a Ltd company client which is run by 2 directors who are equal shareholders in the business at 50% each of the share capital of £1,000
Director A has agreed that Director B’s shares can be returned to the company for the sum of £120,000 which carries stamp duty of £600.
The purchase price will be paid to Director B in 5 equal instalments of £24k each on 31Jul20, 31Jul21, 31Jul22, 31Jul23 & 31Jul24. The stamp duty has been paid on the transfer date of 31Jul20.
They have taken legal advice and determined that this is the agreement they both want, and form SH03 has been filed at Companies House registering the purchase by the company of 500 of its own shares for a transfer price of £120,000. The ltd company is making all 5 payments.
Please can someone help me out with the bookkeeping entries?
- Stamp Duty – assumed that this can be treated as Professional fees: Dr Cost, Cr Bank £600
- Reduction of share capital – Dr Ord Share Cap £500, Cr Goodwill?
- Transfer price agreed – Dr Goodwill?, Cr Trade Creditors £120,000??
- 1st instalment paid £24,000 – Dr Trade Creditors ??, Cr Bank
Your help would be greatly appreciated.