Leaving company... How to transfer my shares?

[Andrew001]

Hello all,

I'm just looking for some advice.
There are a few things happened in my life recently so I was just wondering if you could help me on some.
I decided to go out of my business. There are 2 directors (me and my business partner and each of us holds 50% shares.
I ended up with some health problems after a stressful 10months and said to myself - that's enough. Moreover - I don't see that vision I saw before.
Last week I resigned as a Director (Form 288b has been filled in, signed by another director and sent off to Companies House).
My business partner wants to stay in business and we agreed that I'll transfer all (50%) of my shares to him. The only thing, my shares value is £25k but he can not pay this amount now as he doesn't have any money left. He can't guarantee that he will pay this amount in the future as well, unless the business goes well. He wants me to sell my shares for £1 and if he's doing all right - he will pay my money back (£25k). This is where I need your advice guys as I don't know how legally to sell the shares for £1 but state that their value is £25k. Or shall I do a gift to him which is worth £25k. I know I take a gamble here, but I also know I can trust him. If he succeeds I believe he is going to pay my money back. Anyway, the main thing is not about the money. My biggest concern is: If I'm not a director anymore and don't hold any shares of the company, am I still responsible for the contracts signed when I was a director (Rent, BT, card terminal, etc.). If I am, is there a way I could take all responsibilities off me, draw a new line and start my life again?

Many thanks for your time.

 

[Free Lance]

ONE
Transferring the shares. I would simply have a short agreement that you are selling the shares for a maximum of £25,000. The initial payment is £1 and if x, y and z happen then the buyer will pay you the balance. x, y and z being profits of the company, turnover, sale, or something like that: whatever you think is appropriate.

I would avoid gifting them to him as then you would never have any rights against him and you do not know what your relationship would be like in ,say, 5 years time.

The downside to saying the max price is £25k is that he will have to pay £125 stamp duty on the transfer (0.5% of the maximum amount payable), even if he doesn't ever pay you the full amount.

TWO

You are only liable as a director for the contracts of the company if (a) you entered into them personally and not in the company name (lease for example?), (b) you guaranteed the obligations (lease, overdraft, borrowing, financing?) or (c) the company is insolvent and you should have known that it was but you carried on trading regardless. In the case of (c) this is wrongful trading and a liquidator migth have a claim against you.

If you have any of (a) or (b) do not transfer the shares until you have proper releases from the other parties (not the company). You might need to get a solicitor to check the releases as they may appear to be OK but do not work legally. Getting your name removed from guarantees etc. might be difficult for the company to do so don't leave it until after you have not bargaining chips left.

In your contract with the buyer then you can make him liable personally liable to you if you are ever liable for the debts of the company. That might also help you sleep at night.

 

[tonythomas]

From my own previous experience of doing something similar, I would suggest getting an indemnity agreement drawn up that sets out everything in writing and thus frees you. I got one using one of the legal people off here - cant remember who, but do PM if you need more help and I can dig up the details. Tony

 

[Lime One]

We have dealt with many such agreements for UKBF members and other small business owners who find they need to move on for whatever reason and require indemnity for some risk areas. Happy to quote for you, just email [email protected] with this post's url as reference.

 

[Andrew001]

Hi guys,
sorry never had a chance to say a big thank you for all the replies which really helped me to understand where I am.

Just one more question:
When I incorporated a company, I put the share capital of the company is £100k divided into 1000 ordinary shares of £100 each.
If I transfer my 500 shares, would that affect things like stamp duty, etc?
I also agreed on £10k for my 500shares, would the tax duty be £50?

Many thanks,
Andrew

 

[Free Lance]

You can transfer your shares for any price. It does not matter if they are 1p, £1 or £100 shares. So the stamp duty will be on the transfer price, £10,000 so stamp duty is £50 - usually payable by the buyer, not you.

Two things to check.

(1) When the 500 shares at £100 each, did you actually pay £50k in cash or money's worth into the company as share capital. A good way to check is what your company accounts say on the balance sheet. If not, meaning that the shares are nil or partly paid, the the stock transfer form which actually transfers the shares will also need to be signed by the buyer of the shares (who would ordinarily inherit the obligation to pay up the shares if ever asked by the company).

(2) Did you issue any guarantees of the company's liabilities (lease/overdraft/borrowing, etc.). You will still be liable even if you cease to be a shareholder or director so the buyer must make sure he gets off that liability before the deal is done.

 

[Andrew001]

I didn't put that much into the company as a share capital to be honest. So I'll have ask the buyer to sign the form then, right? Or is there a chance to decrease that amount to realistic (is it not too late now...?)
I was only a guarantor for a lease contract, but on the indemnity agreement I have put:

..that the Company and BUYER (who is going to be a 100% share holder and director) will ensure the release of 'ME' from all and any liabilities, guarantees and any obligations to any third party in connection with the business of the Company
...that in any event where the parties are unable to secure the release of 'ME' from all and any such liabilities and any obligations then that they will jointly and severally indemnify 'ME'.

Would that let me get away from any liabilities related to the lease contract?