Close company shares issued to employees.

TreadStone

Brief outline -

Husband wishes to gift shares to some of his employees for due to health reasons of spouse.

Husband and wife ltd company with £2 share capital (£1 each), shareholders funds say £100,000

No idea of true valuation of the business as no "proper" valuation has been carried out so going with £100k for now.

Wife transfers her single share to husband (again, for health reasons) and a further 98 shares are allotted.

New allotment will be 53 to husband and the other 45 to employees meaning husband retains a 55% controlling interest in his company.

However, there's potential value shifting rules & employment related security issues involved don't you think ? This idea has been passed down to me from the boss but I've advised against it as he clearly hasn't thought about the pitfalls.

Any input from anyone ?

TreadStone

mrme89 said:

Before giving any advice, shouldn’t you be advising your client to get a valuation of the business? As well as legal advice, and possibly a restructure of the shareholders agreement – particularly voting rights and distributions.

Plucking figures out of thin air is just asking for trouble.

Once you have some facts, that’s when you can start looking at the best strategy. EMI options or an EBT might be some of those strategies that are laid on the table.

My thinking exactly.That's my concern and why I literally conveyed those exact thoughts to my boss today. As I say, this isn't something I've spoken to the client about but it certainly doesn't sound as though it's been discussed properly with them. I'm sure I even uttered the words "winging-it".

TreadStone

As a further note, I'm fairly sure the reason for the employee share distribution is for continuity purposes. I suggested additional shares be allotted to husband and he make provisions in his will regarding any future ownership. I thought it best to avoid any employee shareholding at this stage.

TreadStone

mrme89 said:

Winging it will likely cost money unnecessarily in the long-term and might lead to a PI claim.

Best to get the client in and have some sensible discussions. Only then can you start advising.

If this is your boss's attitude, they are a bit of a pillock. Feel free to show them this thread.

Cracking idea but that might lead to a P45

TreadStone

Agreed. Too much speculation. Communication not a strong point in our place.

One of the reasons for one of my other threads "For those that chose to go it alone...."

TreadStone

Don't tempt me !!