Guide on creating/registering company

[peteoc]

Hi,

I'm currently developing a product which I'd be looking to create and register a company. As part of the development to raise funds I'd like to offer people shares in the company.

For example:

Myself & partner create the company and are looking for £3,500 to aid in the development.

I want to offer 1 share per £1 contributed so I'd need at least 3,500 shares for the contributions. I'd then want to hold the majority of the shares myself with my partner taking a lesser share. So my partner would also get 3,500 shares and myself 8,000 shares to make it up to 15,000 shares.

Firstly am I talking complete nonsense?!

Secondly if I'm ok doing the above, am I allowed to enforce a buyout policy? So for example within the first 5 years I have the option of buying each share at a maximum of £2.50 per share?

I've been looking about and without forking out loads of money for someone to sit behind a desk and tell me what to do, I'd like to find out myself.

I'd be grateful for any insight into the above if people are willing to offer it

 

[3Mason]

havent a clue sorry!!! this share issue thing gets me too!!

 

[Scousejock]

Not 100% sure about this but not sure you will find many people willing to take a high risk investment if they can only make a set return (as you stated) during the first 5 years. 20% return over 5 years for a high risk doesnt sound like a good investment to me.

 

[peteoc]

No you get me wrong - the people would get their % in profits but I'm wondering if I can put in a buy out clause or not.

If not then I can simply remove this but it was more of can I do what's proposed by giving shares for contributions etc.

 

[David A]

Your post seems to give the impression that the shares you are writing about are the same. That is, all 15,000 shares are equal and the same.

A far better way of achieving what you want is to think about classes of share.

Thus you and your partner have Class A shares, which have full voting and dividend rights (and by being voting shares, these affect the control of the company.

You can then issue as many Class B shares as you need, which have dividend/profit rights, but are non-voting shares.

There is even a train of thought that you and your partner should also have different classes of shares, even though these will both be full voting and dividend shares. The reason for this is that the tax situation for each of you will be different, and it may be better one year to approve a greater dividend to your partner, and the next yourself. If all shares are the same class, then you do not have this flexibility.

Bear in mind that you can hold more than one class of share, thus you can issue one class that are only voting shares which you divide out according to how you want the company controlled. The second and subsequent are issued as a convenience to approve differing dividends.

 

[peteoc]

David,

Thanks for this - I need to look into the different classes of shares then. Thanks for the advice!

 

[GraemeL]

David,

Thanks for this - I need to look into the different classes of shares then. Thanks for the advice!

Correct. And you should do this before the company is registered and trading. More complicated if there is revenue / loss / profit involved.

 

[toastking]

Sounds like this may be a good way to get together the pennies you need, you may be better off looking for people who are just doing it for a laugh or are gamblers than real investors. I get the feeling you would have a lot of tiny little investors here.