Buying shares from current Ltd company directors

[loknok]

Hi all

This is my First post and i'm looking for some advice.

I am self employed and work for a Ltd company. The current directors want me to become part of the board and have offered me the option to buy a share of the company.

Where do I start?
How can I fund the purchase?
Whom or what services do I need to employ or seek?

All the best Nick

 

[Ray Coman]

You may be able to eligible to join an employee related share scheme, such as an enterprise management incentive.

 

[mr. mischief]

The first thing to ask is whether the price you are being offered is any good. Have there been any recent sales of other companies in your industry lately, and if so do you know what sort of valuations they went for?

Then you'd weigh up the merits of your company compared to those ones. Oh and there are about 100 accounting / spreadsheet based ways of valuing a company and they all look really complicate and fancy and that's how we managed to value Lastminute.com at several Billion back in 2000 even though it had never made a bean of profit.

So personally I don't set much store by any of them and having been involved in a few coporate acquisitions in the £50m to £500m range neither do most savvy businessmen looking to buy companies either.

 

[Wild Goose]

Think about accepting the directorship, which presumably will pay you a worthwhile salary, so that you are involved in the running of the company.

Caveat: do your "due diligence" first of all. That involves hiring someone to check out the company to ensure it is above board, legally run, and solvent - directors take on some of the legal and financial risk if not. Be aware of a director's risks.

The shareholding is a separate matter: that's the ownership of the company. They might eg offer you share options (the option to purchase shares at a favourable price). How you fund that will probably be your own affair - not that of the other directors.Be wary of the company offering you anything along the lines of a loan (from the company) to fund the share purchase, as that can have severe tax implications.

If they're that keen on acquiring you - as opposed to acquiring your cash - then they could always give you shares in the company. That could have tax implications on them, but that's their affair.