Forum Replies Created
Yes, the goodwill generated by building the business will, or should, be factored into the sale price you agree for your shares.
The company can buy back and cancel shares for nil consideration with relevant board and shareholder consents, a buy back agreement and SH03 and SH06 statement of capital forms filed at Companies House. In any case, its hard to decipher exactly what the issues are and therefore to know how best to resolve them. Making mistakes with share capital can be very costly and you should seek specialist advice. Feel free to email an introduction and more information to us at email@example.com and one of the team will be able to fix a no cost no obligation 20 minute call with you to discuss the situation further and provide a suggested scope of work and quote for further assistance.
JonathanSeptember 4, 2019 at 9:44 am in reply to: Issuing Shares after failure to hit Crowdcube target #10139
Other than anything within the Crowdcube terms and conditions, I’m not aware of anything that will restrict or prevent you from raising money from the interested investors who Crowdcube qualified.
We have previously assisted a company raising money outside of Crowdcube when they had earlier failed to reach their target on the platform. The investors signed subscription agreements that clearly outlined the exchange and completion process and included relevant disclaimers and statements to limit any liability, while we also advised on a constitution (new articles and shareholders agreement) that the new shareholders became a party to.
Please do get in touch in due course (via our contact page and form) if you would like to schedule a no cost no obligation call to discuss this further.
If there is nothing in writing between the parties to the contrary (shareholders agreement, director’s service agreement, even any email exchange) then it would appear that the 60/40 shareholding will continue to apply in respect of the company, irrespective of what products are produced. However, how the company remunerates each working shareholder is always a matter for negotiation (split between salary and dividends) and if the parties can’t reach agreement between themselves then they should seek a mediator to help them reach a settlement. See here for further information: https://www.jonathanlea.net/2018/using-mediation-to-resolve-shareholder-disputes/
As an initial point, you can find information here about HMRC and the valuation of private company ‘unquoted’ shares in the UK: https://www.gov.uk/government/publications/hmrc-shares-and-assets-valuations-sav/hmrc-shares-and-assets-valuations-sav
The shares issued to the employees will be deemed employment related securities and considered a ‘benefit in kind’, the value of which will be subject to income tax when received by the employee.
Generally we would argue a relatively low/nil value on a pre-trading company. Unless the company has already created IP you could value. There are also large discounts from the market value for minority shareholdings.
It would therefore be possible to do a (low) valuation for this transaction and send to HMRC’s SAV. However, most pre trading companies will not bother to do this and as there is no market for these shares and they are not considered to have any value that could be taxed as income.
Note that the gift of shares (and value) to an employee needs to be reported by the company to HMRC using a P11d form:
If any value is attributed to the shares then this would go on a personal tax return for income tax purposes and the company will have the Class 1a NICs to pay at 13.8%.
Issuing 98 new shares divided between the three shareholders would appear to work for your scenario.
The nominal value of the shares (in this case seemingly £1) is an arbitrary unit which doesn’t bear any reference to what the value of the shares might be (i.e. what someone will pay for them) and will remain the same unless the share capital is subdivided or consolidated.
You are alloting / issuing new shares to three shareholders, albeit the SH01 statement of capital form you are required to file at Companies House after the allotment will only show the increase in share capital (i.e. the total number of new shares issued and the total share capital after this).
My answer would be the same, other than the consideration has increased! It sounds like you might like to book one of our £150 plus VAT fixed fee consultations (15 minutes reviewing relevant materials and questions, 30 minutes telephone consultation, followed by 15 minutes drafting follow up email confirming points). Please email firstname.lastname@example.org to book
In this situation you could issue a further 100 new shares of nominal value £1 each to the investor so he would have 50% of the company. Make sure the terms of your deal (including the arrangement with the director’s loan) is recorded in a subscription agreement which you both execute before the deal completes / the investor transfers the £10k.
Once you’ve got the comfort of the tax clearance you could effect the transfer with a simple agreement and board minutes, then easily strike off the Scottish company (if no creditors – no need to go through any insolvency procedure)
You could get tax clearance pursuant to section 139 of the Taxation of Chargeable Gains Act 1992 whereby the UK company would receive confirmation from HMRC that the business transfer would not incur any tax charge.
Please get in touch with us via our contact form on our contact page if you would like to set up a no cost no obligation 20 minute call to discuss your matter. Without knowing any further information at this stage, for advising on, putting together the documentation, and applying for tax clearance our fees are likely to be £2,000 to £3,000 plus VAT.
That’s probably right. Other than limited liability, the main advantage of running your business as a limited company is that you are (or used to be) likely to pay less personal tax than a sole trader.
However, the government in 2016 increased the rate of tax on dividends, as well as cut the dividend allowance, so my understanding is that for most freelancers there is no real advantage from a tax perspective any more in trading through a limited company.May 31, 2018 at 12:55 pm in reply to: GDPR and contacting potential clients without consent #3224
Our response was as follows:
“There is yet no specific guidance applicable to your scenario, but our initial view is that you should be able to rely on a ‘legitimate interest’ exception and the ‘balancing test’ to use such data and send the intro letters without consent. See further here.
Our answer was yes, its possible to change the valuation in such a scenario. To do this we would submit a fresh valuation for HMRC to agree (together with an explanatory covering letter) and the company would then lapse the original options and issue new ones with the exercise price set at the lower amount, being the nominal value of the shares subject to the option at the date of grant.December 13, 2017 at 3:36 pm in reply to: Can employees and directors qualify for SEIS tax relief? #2895
Our answer was as follows:
1) It is normally a director of a company who is entitled to SEIS relief.
2) SEIS is not available to employees of the company (or a qualifying subsidiary of the company) unless they are also a director of the company.
3) It must be noted that an individual (including a director) cannot hold a stake in the company exceeding 30%. This includes issued share capital, ordinary share capital and voting rights. This also extends to “associates” shareholdings, this includes any family members (brothers, sisters, aunts and uncles are not included in this) and other business partners. This can limit the availability of SEIS if the majority of shares are largely held by family members. Therefore, you should be careful to ensure that if a director intended to hold 30% or less of shares in the company that shares are not issued to associates so that it exceeds that 30% limit.
So to answer your question, yes your employee can be entitled to SEIS but he/she must also be a director. Also the shares which are issued to him/her must not exceed the 30% limit and you must take care in assessing if shares will be issued to any associates of theirs, as per point 3 above.November 8, 2017 at 1:21 pm in reply to: Why are equity offers to the public by CrowdCube legal? #2849
We expect most crowdfunding platforms rely on CA2006 s756(3)(a) which states as follows:
“An offer is not regarded as an offer to the public if it can properly be regarded, in all the circumstances, as—
(a)not being calculated to result, directly or indirectly, in securities of the company becoming available to persons other than those receiving the offer”
Also relevant will be that as an individual under the FCA Financial Promotions Order you are entitled to receive business plans and make investments through your own decision, provided that you are able to self-certify yourself as either a High Net Worth Individual or a Sophisticated Investor.