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Troubles with reflecting shares in reports

Troubles with reflecting shares in the annual accounts

We are preparing the accounts for a company and are strugling to reflect the shares situation. When the company was initially incorporated the company director issued one share with the nominal value per share £1000. When the Confirmation statement was due the company director, knowing that soon a second director will join the company and one share can not be divided between himself and the future new director,  he declared in the first Confirmation statement that the company had 100 shares, and the nominal value per share is £1. Could you please advise how to reflect in the company second financial year the change in shares, the fact that total agregate nominal value of the 99 new shares issued together with the one issued initially is now £100. What will be the DRs and the CRs posting in this case.

Also in regards to how the director acted in this case are there any legal cosequences?

Any advise will be very appreciated. Thank you

 

 

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11th Jan 2019 18:34

Unfortunately, your client is one of the many know-alls who think they know what they're doing.

The line of least resistance here is to subdivide the £1000 share into 1000 £1 shares. In theory, you can reduce the share capital to £100, in practice, it'll probably cost more in fees than the £900 he'd save.

If you're toey about the Confirmation Statement, submit a fresh one.

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to lionofludesch
11th Jan 2019 18:55

Thank you for the reply. Could you please tell me how to reflect the change in value of the shares from £1000 each to £1. Where would the £900 lost be posted? Also could you be more specific about the cost in fees you were mentioning. Do you mean legal fees? I would like to choose the most efficient way to make this adjustment

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By DJKL
to Ramona7195
11th Jan 2019 22:07

There is surely nothing to reflect except in the notes to the accounts.

A. 1 ord £1,000 share fully paid, S Cap £1,000
B 1,000 ord £1 shares fully paid, S Cap £1,000

Changing the confirmation is pointless until a resolution is passed (edit-not past) by the company agreeing the share class split.

I suspect it needs an EGM called and notice waived (if only one shareholder not an issue) and then possibly a Special Resolution re splitting the existing issued shares from One share nominal £1,000 to a thousand shares nominal £1.

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11th Jan 2019 19:23

You should consult your supervisor to ask him or her how they would like you to proceed. A decision needs to be made on how to correct and record the issue.

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11th Jan 2019 19:48

There has been no change in shares to reflect in the accounts - just a Confirmation Statement incorrectly reflecting that there has.

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11th Jan 2019 20:00

Thank you all for the replies. The company director suggested to leave the share of £1000 as it was initially stated and to send a new Confirmation statement to Companies House for correction declaring one share of £1000 as it was initially declared back in May 2016 when company was incorporated. All dividends will be declared on his name, the second director(his wife) is ok with this as well. Is this solution viable?

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By DJKL
to Ramona7195
11th Jan 2019 20:35

Depends if wants wife to also own shares, if he does then she subscribes for another £1,000 share, paying say £1,000 into the company for it, or he splits his holding into say 1,000 £1 shares and then gifts her 500 of these.

However he ought to take some advice from an accountant re either route, especially if in future wishes to pay dividends to both of them.

If she is merely to be a director but not a shareholder then do nothing except appoint her as a director.

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to Ramona7195
11th Jan 2019 21:51

Ramona7195 wrote:
Is this solution viable?

Viable yes. Advisable ? Depends on a lot of factors.

Why don't you transfer the share into joint names ?

Either way, you're stuck with the £1000 in share capital. It isn't practical to reduce it to £100. The benefit won't justify the cost.

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