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Share transfers between directors

  • Thread starter Thread starter AlisonE
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AlisonE

When we set up a family company about 7 years ago, the 3 directors took equal share allocations (100 shares of £1 each). Our accountant advised us that if the directors ever wanted to receive different dividends from each other, then if we were all in agreement this could be handled by a simple share transfer. Eg, 2 directors would transfer shares to the third director so the third director could have a higher dividend. The reason for wanting to do this would be if different directors had brought different amounts of business into the company and would therefore be due a different reward.

We were advised that the share transfer would be handled through the directors loan accounts rather than any cash changing hands, and we were told to fill in a stock transfer form declaring the transfer as a transfer at nil value. However, we are now concerned that this was poor advice and that a CGT liability could arise at the point of share transfer. Has anyone received similar advice or come across this issue?

Many thanks
 
If you wanted flexibility in the dividend amounts paid to directors you would have been better having different share classes rather than what you have been advised.

Dividends voted must be paid in relation to the share holding of each individual class of shares.

Differing dividends can be voted to each individual class (Or even none at all to some classes):)
 
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I agree with Alan - this is the standard planning in such a scenario.

Your accountant's advice appears to be very odd.
 
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Thanks for that. Is it possible to change the classes of shares that have already been allocated - eg so that director A has class1 shares, B has class 2 etc.., if the shareholders agree to the change? Do you know what documents we would need to complete to do this?

Another idea I had is to issue more share capital to the director who wants a bigger dividend. This would involve raising our authorised share capital above the limit originally set in our articles of association. If we fill the relevant forms in, do you see any problem with this solution?

Thanks again
 
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Thanks for that. Is it possible to change the classes of shares that have already been allocated - eg so that director A has class1 shares, B has class 2 etc.., if the shareholders agree to the change? Do you know what documents we would need to complete to do this?
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Well you would actually issue A,B and C class ordinary shares.
It would be worth getting a solicitor or company formation expert to do this for you.

We use http://www.quickformations.co.uk to do this

Another idea I had is to issue more share capital to the director who wants a bigger dividend. This would involve raising our authorised share capital above the limit originally set in our articles of association. If we fill the relevant forms in, do you see any problem with this solution?
Click to expand...

This would have a similar effect to what your accountant has already suggested and again doesn't give you much flexibilty (what about if you want to vary dividends differently in the future??)
 
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