Shares

charlenebb
charlenebb Settling In NicelyRegistered Posts: 38
Hi everyone

I need to know how to treat shares issued to a new director of a company. The company merged with another small company and the new director bought shares of £9K. (I do not know how many shares she bought as I haven't been told as yet).
I know that the money has come into the bank so this will be a debit in our books and the credit amount should be capital. Is this right or is it debit bank, credit profit and loss and then deal with the issue of the shares in the balance sheet?. I haven't dealt with shares for a long time so I am a bit rusty. Any advise would help.

Comments

  • burg
    burg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Who bought the new shares the director or the company?

    Were they new shares issued or did an existing shareholder reduce there own shareholding?

    If new shares were issued for a premium then you need to issue the new shares and have a share premium account. If it was say £100 new shares of £1 then...

    New Shares Issued Cr £100
    Share Premium Account Cr £8900
    Bank Dr £9000

    If an existing shareholder sold the shares to a new shareholder then nothing happens in the company. It is a private dealing between the two shareholders. The company register would be updated to show the new shares ownership and updated on the new annual return. A stock transfer form may need to be done and sent to HMRC and stamp duty paid. The individual selling may need to report a capital gain on their SATR.

    Apologies but lots to work out before deciding on what is next.
    Regards,

    Burg
  • charlenebb
    charlenebb Settling In Nicely Registered Posts: 38
    Thank you so much for getting back to me. Yes the director an existing shareholder sold his shares. I am not sure if additional shares were also sold (I will know next week when I visit the client). The money he recieved for the shares has come into the company bank account. He originally held 25 percent of the business (£25.00). There were originally only two shareholders. 75 & 25 percent (£100 share)
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