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What is the right way to issue new shares?

I need to issue shares 20% equity for a new investor (under SEIS compliance)

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I need to issue new shares for an investor who is looking for SEIS tax relief (we have received HMRC advance assurance).

Should the new shares be issued at the current par price of £0.01 and the rest treated as share premium?

Or should the new shares be issued at the right share capital (e.g. for £10k investment, issue 25 new shares (representing 20% equity) at a par of £400? and 0 in share premium? or should it be Option B  par of £0.01 and share premium of £399.99 per share?)

What are the advantages and disadvantages of either of these otpions?

Replies (6)

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By David Ex
07th Dec 2021 18:09

I think you mean “Please will someone give me free professional advice”.

Thanks (1)
By williams lester accountants
07th Dec 2021 19:27

basir wrote:

What are the advantages and disadvantages of either of these otpions?

The advantage of getting free advice, is it costs nothing.

The disadvantage is it is worth nothing. As you have no comeback if that advice is wrong.

Go and get paid for advice in writing from your accountants.

Thanks (3)
paddle steamer
07th Dec 2021 19:45

Ask yourself what class of shares he/she has agreed to pay £10,000 for a 20% interest of same, presume same class as existing issued shares, once you are clear what he is buying and notional value of same all else will follow.

Thanks (1)
Replying to DJKL:
By basir
07th Dec 2021 21:49

Much appreciated - is there a way of getting in touch and discussing this further?

Thanks (0)
Replying to basir:
paddle steamer
08th Dec 2021 10:09

Sorry, I cannot offer any accountancy or taxation services as I gave up practice in 2019 and these days carry no MLR or PII( for those knowledgeable about Rumpole I am now, regarding Accounting Web, more akin to Uncle Tom and am merely here chipping shots into the waste bin in the clerks' room.)

You do likely want professional advice re this, bringing onboard a solicitor is likely a good idea and ensuring someone knowledgeable re SEIS (which may be you) is also a good idea.

Point one is find out what the parties understood their agreement to be, if same class of shares as existing then things are then hopefully pretty straightforward.

The shareholder agreement is also likely a clever idea.

Thanks (1)
By paul.benny
08th Dec 2021 08:47

Have you - and Investor - considered a shareholder agreement?

It would be wise to address, for example, when Investor can and can't sell their holding (and to whom), whether you can dilute Investor's holding by issuing more shares, representation on Board. And so on.

Thanks (2)
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