Question on transfer of shares between directors

pirate

Hi there

Am looking for some advice on where I can find out this information. Have done a lot of web searchs but it all seems to come up with legal advise on how to remove a director due to conflcts etc

So the situation is there is a company with two directors and equal shareholding
One of the directors no longer wishes to take any dividends from the company due to the tax implications as they are a 40% tax payer and would push their earning into a really high tax bracket.
there is no falling out between directors and the director no longer is actively involved in the company due to other committments and other companies
but the other director still wishes to received dividends and is actively involved.

So if a dividend is issued in a tax year of say £30,000 this means that each shareholder would get 50% each. Each director would get 15000 and the director on high income would need to pay 32.5% tax etc.

How can the director who no longer want to be involved relinguish his directorship and his shareholding without taking anything from the company.

I just need some general advice on where to look for the answer to this question as I am going round in circles at the moment

many thanks

mattaat

RE: Question on transfer of shares between directors

As far as im aware the directors will need to come to some agreement as to what happens to the shares owned by the director wanting to leave. Depending on how much the company is worth the shares could be brought by the other director or they could just be handed over but im no pro on the matter :P

Monsoon

A temporary solution is a dividend waiver. This needs to be formally drawn up and in place before a dividend is declared.

If one director wants to sell his shares to the other, the other has to buy him out - the shares will have a value, and this should be paid - and will be subject to possible CGT and stamp duty. He can of course sell his shares at cost, but if the business has a value, then that would arguably be silly, unless he's a philanthropist ;-)

If the parties are unconnected other than by business then I *think* he can sell them at under-value with no tax consequences, but I am not sure. If they are connected parties then the transfer will be deemed at market value.

pirate

Thanks Jenni

we are related but not married. Basically set up to run a consultancy business both parties contributing. Since November no transactions through the business as one person has gone to work so no longer working and the other is doing some training so now in a new financial year no money been taken out yet no dividends yet so not sure how we would value the business to be honest. there is only reserves in the business so not sure how to value it. Want to avoid charges and tax if possible coz of course on going as we are 50/50 any dividend declaration would be subject to 40% tax for him as he is in work but for me is the best way to be paid. He is happy to come off the business. I don't want to close bus down as I like the name

anyway thanks for your imput it seems Ive got a complicated question lol

Monsoon

Get married. Transfer is then at nil gain nil loss!

pirate

Ha yes theres a solution lol