Termination of Director

mike1983

Hi everybody,

A company has 2 directors with 50 unpaid shares each.

After an argument, one of the directors wants to resign.

I sent him the relevent paperwork (resolution, TM01 and share transfer form).

He has come back saying he wants paying for the share. The company is less than 6 months old and is hardly worth anything.

He said he has put a lot of time and money into the business. I suspect they both have.

Am I best just preparing the accounts to todays date and issuing interim dividends to equal things up?
Then after this we can sort the termination and share transfer out?

Monsoon

You can't issue interim dividends - they need to (sorry, nitpicking!).

You can only advise them, and let them come to an agreement themselves.

Dividends seem to be a sensible option, but only if there is profit there (presumably if there was, they'd have taken remuneration anyway?)

Alternative is a tax free "loss of office" payment to director (tax deductible in company) and payment for share at par.

Taxman

A director resigning from the company should be pretty straightforward - he resigns and the Board of directors accepts it. A form is then sent out to the Comp Hse to update the public register. In order for the director to transfer his shares, the other shareholder should be willing to buy him out. At what price that is done would depend on how the business is valued. It is the Board that decides to declare or not to declare a dividend. Preparing accounts to-date is indeed a good start.

mike1983

Thanks Monsoon,

Sorry for late reply!

Haha, I don't mind nitpickers, they improve my effieciency

I am aware that I can only advise them.

I'm in the process of preparing their accounts and have informed them they can only issue dividends if there is a profit after CT.

Thanks for your advice.

mike1983

Thanks Taxman,

I don't think the company is really worth anything yet as it has only been trading since early this year.